Global Equity Weekly

June 11, 2021 | 16:41

Hot or Not?

Economist

Economist
Economics

Carl Campus joined BMO Economics in 2007 as a Research and Technical Assistant; he was later promoted to his cur... (Read more)

Carl Campus

Economist
Economics

Carl Campus joined BMO Economics in 2007 as a Research and Technical Assistant; he was later promoted to his cur... (Read more)

Despite a cautious start, equity market sentiment improved into the end of the week, as investors largely shrugged off some hotter-than-expected inflation datapoints ahead of the G7 Summit. The S&P 500 rose to an all-time high this week, adding 0.4% since last Friday with health care and consumer discretionary sectors providing the biggest boost. On the flip side, financials and materials lagged the pack, though even with the pullback, they still sport the largest gains over the past year (+60%-to-70% range)… Not bad. The TSX also dug deep, reaching an all-time high, not once, but twice this week. The index posted a solid 0.5% gain since last Friday on strength in health care and technology stocks, while financials and consumer discretionary underperformed north of the border.

On the economic data front, U.S. consumer prices took centre stage, and while both headline and core CPI growth accelerated in May, equity markets weren’t exactly fussed by the hotter-than-expected gains, as “transitory” remained the mantra (and thus, less worry that the policy accommodation rug will be pulled abruptly). The Bank of Canada echoed that sentiment at Wednesday’s monetary policy meeting, blaming the current pick-up in core inflation on “temporary factors and base year effects”.

Switching gears to Europe, the ECB also chimed in this week but made no direct policy changes at Thursday’s monetary policy meeting. Still, GDP and inflation forecasts were cranked up a notch for this year and next, though importantly, President Lagarde noted that she saw “no reason to expect rising inflation to last”. In China, producer prices flashed their strongest year-on-year growth in more than a decade (+9.0%y/y in May), highlighting Beijing’s concerns over the latest surge in commodity prices. Still, so far the passthrough to consumer prices has been limited, as CPI growth rose to a moderate 1.3% y/y pace.

Table 1 - Market Performance

Source: BMO Economics, Bloomberg

North American Sector Performances

(% change over period)

Table 2 - S&P 500 Sector Performance

Source: BMO Economics, Bloomberg

Table 3 - TSX Sector Performance

Source: BMO Economics, Bloomberg

TSX Relative Sector Performance

(relative to the index, year-ago = 100; dashed line = 200-day m.a.)

S&P 500 Relative Sector Performance