April 2023 market update – Canadians are feeling the squeeze of higher rates

Introduction

Global equity markets were relatively volatile over April but finished the month higher. Sentiment swung as investors speculated about the size of the next interest rate hikes by the U.S. Federal Reserve Board (“Fed”) and other central banks based on incoming economic data. Toward the end of the month, confidence in the U.S. banking system was frayed after First Republic Bank announced deposits dropped by 42% in the first quarter. Regulators stepped in and JPMorgan Chase & Co. agreed to acquire the troubled bank at the end of the month.

There were no Fed, Bank of England and European Central Bank meetings in April. The Bank of Canada (“BoC”), Bank of Japan and People’s Bank of China held their key interest rates steady during the month. Inflation subsided again in March but remained relatively elevated. Global labour markets were strong, continuing to prop up consumer strength. Global manufacturing and service sector activity provided mixed results over April.

The S&P/TSX Composite Index posted a gain, with all 11 sectors delivering a positive return. In the U.S., the S&P 500 Index advanced, benefiting from the strong performance of the Communication Services sector. The price of oil and gold ticked higher over the month. Yields on 10-year government bonds in Canada and the U.S. finished largely unchanged.

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