CAD September Market Performance

Noteworthy Developments

Equity markets (MSCI ACWI Index) declined by 3.7% in CAD (-4.2% in USD) during September, with declines driven largely by rising interest rates, especially in the US.  The CAD weakened by 0.5% vs. the USD.   

Global Equities

Global equities were down 3.7% in CAD with widespread declines across major regions.   The S&P 500 was down 4.3% as Treasury yields continued to increase following the Fed delivering a higher-for-longer rates outlook.  (The Fed now believes interest rates will decline to 5.1% by YE 2024 from 4.5% earlier).   The US 10-year Treasury bond rose by 47bps from 4.1% to nearly 4.6% over the month.  Also, rising crude oil prices have led to fears that input cost increases may bleed into the broader economy and that continued progress in reducing core inflation may prove difficult to achieve.  International developed stocks (MSCI EAFE Index) were down 2.9% in CAD as Eurozone macroeconomic data continued to weaken, especially in Germany.  Emerging market equities (MSCI EM Index) were down 2.1% in CAD with China macroeconomic data showing continued weakness.  Globally, growth stocks underperformed value stocks (-5.0% vs. -2.1%) as interest rate increases derailed some of the high YTD gains for fast-growing technology and other growth companies.   Globally, technology, consumer discretionary, and industrial sectors performed worst at -6.0%, -4.8%, and -4.5% respectively, while energy stocks performed best at +3.1% in CAD.

Fixed Income

The benchmark Broad-Market Canada bond index was down 2.6% for the month with the declines driven by rising interest rates.  Government and provincial bonds were down 2.3% and 3.3% respectively, while corporate bonds were down 1.7%.  

Alternatives

The HFRX Global Hedge Fund Index was up 0.4% for the month in CAD (-0.1% in USD).  Merger-arbitrage strategies and macro / trend following strategies performed best at +1.1% and +0.9% in CAD respectively while directional strategies such as equity-hedge and credit generally were down -0.2% to -0.4%.   Convertible arbitrage strategies performed worst at -0.7%.

Commentary

Carlson: +1.4% in CAD (+0.9% in USD)

Unusually high monthly return driven by certain deal closures and general M&A spread compression.

Carrhae: -4.7% in CAD (-5.2% in USD)

Underperformed the MSCI EM Index (-2.1% in CAD) driven by weakness in certain large positions such as Prosus and Taiwan Semiconductor which were down 7% to 9%. 

Octagon: +1.8% in CAD (+1.3% in USD)

Strong performance driven by high underlying coupons on floating-rate loans as well as through utilization of fund-level leverage.