CIBC Private Wealth
April 18, 2024
Money Financial literacy Economy Professionals NewsMorning Market Brief
Statistics Canada reported that foreign investors took money out of Canada in February. This was the first time in four months foreign investors were net redeemers of Canadian securities, suggesting concerns about Canada’s economic conditions might be weighing on foreign investor sentiment. But this might prove to be a small hiccup as there is a lot to like about the quality of Canadian securities and the overall health of Canada’s economy.
- Foreign investors redeemed a net $8.78 billion of Canadian securities over the month of February. This largely gave back the net purchases of $8.88 billion of Canadian securities in January. February’s net redemptions were the first since October 2023, which had capped off three straight months of net redemptions.
- The largest divestment was in Canadian government bonds, which had net redemptions of $15.1 billion in February, a record high. Foreigners also reduced their exposure to Canadian equity securities and investment funds. Conversely, foreigners were net purchasers of Canadian corporate bonds over the month.
- As of April 16, the S&P/TSX Composite Index has delivered a return of just above 3%. Although relatively healthy given the current economic climate, it has lagged most other developed market economies so far in 2024. Meanwhile, bond prices have fallen year-to-date in 2024, but the average yield of fixed income investments has risen.
- Canada’s economy has weakened over the past couple of quarters amid tight financial conditions. However, inflation is coming down and the Bank of Canada (BoC) appears ready to soon begin cutting rates, which could stimulate economic activity.
Despite the net redemptions out of Canadian securities in February, Canada remains a relatively attractive place to invest. Stock and bond prices might be poised for growth as the year progresses as economic activity potentially improves and if the BoC begins lowering interest rates, as expected.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.