By Muskan Arora
The median Canadian Pension Plan returned
4.8% for the quarter and 8.4% year-to-date as of September 30 led by stocks and
bonds, as noted by Northern Trust Canada Universe.
Multiple events triggered volatility in the
third quarter including elections in UK and France, the Bank of Japan’s “hawkish
policy narrative”, periodic selloffs across the technology sector and “pockets
of weak economic data” which dissuaded investors, an October 24 news release
stated.
Despite this, most major central banks
looked towards the fundamentals underpinning the economy, including inflation, as
it continues to decline across developed regions.
This has allowed the leading policymakers to
maintain or embark upon a less restrictive tone including the U.S Federal
Reserve cutting rates by 50 basis points on September 18.
During this volatile period, both equities
and bonds underwent policy shift along with the announcement of China’s massive
stimulus package and finished the quarter with a solid positive performance.
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“As major central banks around the globe
seek a path to neutrality, Canadian pension plans remained in solid financial
form supported by healthy solvency ratios. Throughout the interest rate
journey, plan sponsors exercised vigilance through the lens of balancing risks
and adopting sound strategies that position plan investments for a successful
and sustainable retirement future,” said Katie Pries, President and CEO of
Northern Trust Canada.
In the third quarter, Canadian equities
which are measured by S&P/TSX Composite Index rose 10.5%, whereas U.S.
equities, measured by S&P 500 index, returned 4.5%.
Parallelly, international developed
equities, measured by MSCI EAFE index returned 6% for the quarter, whereas MSCI
Emerging Markets index returned at 7.5%.
The Canadian fixed-income market surged by
4.7% for the quarter alongside provincial bonds witnessing the strongest gains
followed by corporate and federal bonds.
The Canadian economy saw downward pressure
on inflation throughout the quarter impacted by excess supply. As the job data
continued to show signs of softening, this led the Bank of Canada (BoC) to
continue its monetary easing cycle.
The Canadian economy noted a “downward
pressure” on inflation during the quarter which was impacted by excess supply. The
job data continues to show “signs of softening” which ignited the Bank of
Canada (BoC) to continue its monetary easing cycle.
In its September meeting, BoC cut interest
rates by 25 basis points to 4.25%, marking the second cut of the quarter and
third since January.
The Northern Trust Canada Universe tracks
the performance of Canadian institutional defined benefit plans that subscribe
to performance measurement services as part of Northern Trust’s asset service
offerings.
