Noteworthy Developments: Global equities (MSCI ACWI Index) declined 0.8% in December in CAD. However, the decline was due to
currency translation, as CAD strengthened by 1.8% relative to the USD. In USD terms, the ACWI Index appreciated by 1.0%, with regional performance varying.
Global Equities: Global equities, as represented by the MSCI ACWI Index, declined 0.8% in CAD terms during December, despite rising 1.0% in USD, reflecting the strengthening Canadian dollar over the month. US large-cap equities (S&P 500) declined 1.8% (flat in USD), while international developed and emerging market equities each gained 1.1% (+3.0% in USD).
International developed equity performance was primarily driven by strong European equity returns (+2.0% and +2.8% in local currencies). European cyclical stocks performed especially well as investor optimism rose with regard to potentially improving economic conditions and higher fiscal spending. Emerging market returns were driven by the strong performance of Korea and Taiwan equities (+10.0% and +4.0%), which benefited from outsized exposure to semiconductor companies, which were buoyed by exceptional demand associated with AI capex spending.
Value stocks (+0.0% and +1.9% in USD) outperformed growth stocks (-1.6% and +0.2% in USD). Financials (+2.4% and +4.3% in USD) and industrials (+0.2% and +2.1% in USD) performed best. Defensive sectors lagged, with healthcare (-2.8% and -1.0% in USD) and consumer staples (-2.9% and -1.1% in USD) sectors performing worst.
Fixed Income: Canadian fixed income declined in December, with the Canada Broad Market Index down 1.3%, as bond yields rose across the yield curve. Canadian government bond yields rose by 5-30 bps across the curve, with the yield curve steepening as yields rose more for intermediate- and longer-dated bonds than for shorter-term maturities. Canadian government bonds declined 1.4%, investment-grade corporate bonds fell 0.6%, and provincial bonds declined 1.7%.
Alternatives: Hedge funds (HFRX Global Hedge Fund Index) declined 1.2%, with currency translation detracting from strong USD underlying returns (+0.6%). Most strategies delivered positive performance in USD with global macro/trend following (-0.5% and +1.3% in USD) and merger arbitrage (-0.6% and +1.2% in USD) performing best.
CAD December Market Commentary
Noteworthy Developments: Global equities (MSCI ACWI Index) declined 0.8% in December in CAD. However, the decline was due to
currency translation, as CAD strengthened by 1.8% relative to the USD. In USD terms, the ACWI Index appreciated by 1.0%, with regional performance varying.
Global Equities: Global equities, as represented by the MSCI ACWI Index, declined 0.8% in CAD terms during December, despite rising 1.0% in USD, reflecting the strengthening Canadian dollar over the month. US large-cap equities (S&P 500) declined 1.8% (flat in USD), while international developed and emerging market equities each gained 1.1% (+3.0% in USD).
International developed equity performance was primarily driven by strong European equity returns (+2.0% and +2.8% in local currencies). European cyclical stocks performed especially well as investor optimism rose with regard to potentially improving economic conditions and higher fiscal spending. Emerging market returns were driven by the strong performance of Korea and Taiwan equities (+10.0% and +4.0%), which benefited from outsized exposure to semiconductor companies, which were buoyed by exceptional demand associated with AI capex spending.
Value stocks (+0.0% and +1.9% in USD) outperformed growth stocks (-1.6% and +0.2% in USD). Financials (+2.4% and +4.3% in USD) and industrials (+0.2% and +2.1% in USD) performed best. Defensive sectors lagged, with healthcare (-2.8% and -1.0% in USD) and consumer staples (-2.9% and -1.1% in USD) sectors performing worst.
Fixed Income: Canadian fixed income declined in December, with the Canada Broad Market Index down 1.3%, as bond yields rose across the yield curve. Canadian government bond yields rose by 5-30 bps across the curve, with the yield curve steepening as yields rose more for intermediate- and longer-dated bonds than for shorter-term maturities. Canadian government bonds declined 1.4%, investment-grade corporate bonds fell 0.6%, and provincial bonds declined 1.7%.
Alternatives: Hedge funds (HFRX Global Hedge Fund Index) declined 1.2%, with currency translation detracting from strong USD underlying returns (+0.6%). Most strategies delivered positive performance in USD with global macro/trend following (-0.5% and +1.3% in USD) and merger arbitrage (-0.6% and +1.2% in USD) performing best.
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