Market Quote: Interest Rates Expectations Still in Flux, China’s Equity Market Back in Play
Author: The editor's desk
May 29, 2024
A mid-week analysis of what’s happening in global financial markets from the perspective of AGF’s investment management team
Rate Debate
Interest rate markets have been caught between competing forces in recent months. On the one hand, decelerating inflation trends in many jurisdictions, including Canada and the Eurozone, have increased confidence in the prospects for imminent central bank rate cuts. On the other hand, signs of rebounding manufacturing activity and resilient consumption of services may have pushed out the timing of rate cuts, if not calling into question the potential for any cuts at all in countries like the United States and Australia. Compounding the upward pressure on bond yields has been the enormous amount of U.S. Treasury issuance.
The upcoming U.S. Personal Consumption Expenditures (PCE) inflation release on Friday looms large, followed by the Bank of Canada and European Central Bank announcements on June 5 and June 6, respectively. So far, global equity markets have shrugged off higher yields as earnings growth, particularly in sectors like Technology, Financials and Utilities, has supported stocks. However, under the surface, market breadth has slipped with the median stock lagging headline indexes. So, if bond yields were to rise much further, we believe that would likely present an unwelcome challenge for some investors.
Plenum Momentum
The MSCI China Index seems headed towards its first year of positive returns since 2020, having quietly surged more than 25% in U.S. dollar terms from its January lows. Bolstered by emerging signs of earnings growth for Chinese companies and policy support for the country’s property sector, the index is now up 11% year-to-date, significantly outperforming the S&P/TSX Composite Index, which is up around 4%, and nearly matching the S&P 500 Index’s nearly 12% return.
Going forward, we believe sentiment toward Chinese equities will remain positive as the long-delayed Third Plenum of China’s 20th Central Committee – a plenary session of senior Party officials – draws closer and finally takes place in July.
For full bios, please visit our contributor’s page.
The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds, or investment strategies.
Commentary and data sourced from Bloomberg, Reuters and other news sources unless otherwise noted. The commentaries contained herein are provided as a general source of information based on information available as of May 29, 2024. It is not intended to address the needs, circumstances, and objectives of any specific investor. The content of this commentary is not to be used or construed as investment advice, as an offer to buy or sell any securities, and is not intended to suggest taking or refraining from any course of action. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Market conditions may change and AGF Investments Inc. accepts no responsibility for individual investment decisions arising from the use or reliance on the information contained herein.
This document may contain forward-looking information that reflects our current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein.
For Canadian investors: Commissions, trailing commissions, management fees and expenses all may be associated with investment fund investments. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently, and past performance may not be repeated.
AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFI is registered as a portfolio manager across Canadian securities commissions. AGFA and AGFUS are registered investment advisors with the U.S. Securities Exchange Commission. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The term AGF Investments may refer to one or more of these subsidiaries or to all of them jointly. This term is used for convenience and does not precisely describe any of the separate companies, each of which manages its own affairs.
AGF Investments entities only provide investment advisory services or offers investment funds in the jurisdiction where such firm, individuals and/or product is registered or authorized to provide such services.
Investment advisory services for U.S. persons are provided by AGFA and AGFUS. In connection with providing services to certain U.S. clients, AGF Investments LLC uses the resources of AGF Investments Inc. acting in its capacity as AGF Investments LLC’s “participating affiliate”, in accordance with applicable guidance of the staff of the SEC. AGFA engages one or more affiliates and their personnel in the provision of services under written agreements (including dual employee) among AGFA and its affiliates and under which AGFA supervises the activities of affiliate personnel on behalf of its clients (“Affiliate Resource Arrangements”).
® ™ The “AGF” logo and all associated trademarks are registered trademarks or trademarks of AGF Management Limited and used under licence.
RO:20240529-3611065
About AGF Management Limited
Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. Our companies deliver excellence in investing in the public and private markets through three business lines: AGF Investments, AGF Capital Partners and AGF Private Wealth.
AGF brings a disciplined approach, focused on incorporating sound, responsible and sustainable corporate practices. The firm’s collective investment expertise, driven by its fundamental, quantitative and private investing capabilities, extends globally to a wide range of clients, from financial advisors and their clients to high-net worth and institutional investors including pension plans, corporate plans, sovereign wealth funds, endowments and foundations.
Headquartered in Toronto, Canada, AGF has investment operations and client servicing teams on the ground in North America and Europe. AGF serves more than 800,000 investors. AGF trades on the Toronto Stock Exchange under the symbol AGF.B.
For further information, please visit AGF.com.
© 2024 AGF Management Limited. All rights reserved.
