Overview of pension fund returns and financial markets
1st quarter 2021
SAI Balanced Funds Index
With the rollout of COVID-19 vaccines gaining momentum around the world, and governments and central banks in several countries that are working together to introduce accommodative measures to boost the economy, investors appear optimistic regarding the stock market’s performance and the long-awaited global economic recovery. The SAI Balanced Fund Index climbed 1.45% in the quarter.
The Canadian bond market’s performance, represented by the FTSE TMX Canada Universe Index, fell 5.0% during the period.
- Short-term rates have remained relatively stable, while medium-term and long-term rates have jumped several points amid inflationary fears. This results in quarterly returns for short-, medium- and long-term bonds of -0.6%, -4.5% and -10.7% respectively.
- All sectors of the index had negative returns this quarter. Particularly, provincial bonds (-7.2%) underperformed compared to corporate bonds (-3.5%). This is mainly explained by a shorter maturity for all corporate bonds than that of all provincial bonds.
- High-yield bonds have been favorable over the past three months with a return of 2.2%.
- During its last meetings on January 20th and March 10th, the Bank of Canada maintained its overnight rate at 0.25%.
The Canadian stock market continued to climb in the first quarter, reflecting strong investor confidence in the economic recovery. The market’s index, S&P/TSX, gained 8.1% over the past three months.
- Most sectors of the index finished in positive territory, with the exception of the Information Technology sector (-1.1%) and Materials sector (-6.9%). The index’s good performance is explained by the Energy (+20.3%) and Financials (+13.9%) sectors excellent returns which represent more than 40% of the index. Furthermore, the Health Care sector (+38.0%) continued to lead the way for a second consecutive quarter.
- Canadian small-cap stocks have been the most profitable for Canadian investors. Returns for the S&P/TSX small-cap, S&P/TSX mid-cap and S&P/TSX 60 indices were 9.7%, 5.4% and 8.8% respectively.
After a full year since the COVID-19 outbreak, global stock markets in developed countries have reached new highs this quarter. During this same period, the MSCI World’s return was 6.1% in local currencies.
- The Canadian dollar appreciated against MCSI World Index local currencies, resulting in a return in local currencies (+6.1%) higher than that calculated in Canadian dollars (+3.5%).
- The US stock market index, S&P 500 USD, continued its momentum posting a return of 6.2%. In March, Joe Biden administration's $1.9 trillion COVID-19 relief package was adopted. This is the third action plan of such magnitude since the start of the pandemic. Furthermore, additional measures already announced in the order of 3 trillion dollars are to be expected, the latter aiming to create jobs through an infrastructure boost. These measures are intended to support and stimulate the US economy over the coming years. For its part, the Federal Reserve’s message continues to be about accommodation while expressing its readiness to accept higher levels of inflation in order to achieve full employment.
- The MSCI EAFE Index (local currencies), which primarily represents the global stock market of developed countries except Canada and the United States, posted a quarterly gain of 7.6%. Just like in the United States, the European Union's stimulus measures are massive and aim to support and stimulate the Euro Zone economy over the next few years. Together, the European Central Bank has also indicated its intention to accelerate its Asset Purchase Programmes.
- Emerging markets, represented by the MSCI EM Index in local currencies, posted a moderate quarterly return of 4.0%. On the economic side, China is benefiting strongly from the global economic recovery with a sharp increase in manufacturing production and exportation. On the other hand, sanctions imposed on China by Europe, the United States, England and Canada against abuse of human rights has increased geopolitical tensions.
|Indices||Q1 2021||Year 2021|
|SAI Balanced Funds Index1||1.45%||1.45%|
|FTSE TMX Canada Universe||-5.04%||-5.04%|
|MSCI Emerging Markets|
1 The composition of the SAI Balanced Funds Index is 40% FTSE TMX Universe, 30% S&P/TSX and 30% MSCI World.
|Medians||Q1 2021||Year 2021|
|Median SAI Balanced Funds||2.22%||2.22%|