Overview of pension fund returns and financial markets - 2nd quarter 2018

SAI Balanced Funds Index

The SAI Balanced Funds Index had an excellent second quarter with a return of +3.4%, which allowed it to return to positive territory for the year to date with a return of +2.5%.

Canadian Bonds

Overall, bonds posted positive returns for the quarter and the FTSE TMX Canada Universe Index gained 0.5% over the period. 

1. The Bank of Canada has maintained its overnight rate at 1.25% twice in the second quarter, which suggests a potential increase in the third quarter.
2. For its part, the Fed raised its key rate by 0.25% to 2.00% in June. This is a second increase since the beginning of the year.
3. At the sector level, provincial bonds returned +0.8%, while corporate and federal bonds returned +0.4% and +0.3%, respectively.

Canadian Equities

The Canadian stock market outperformed global markets during the quarter, that is a return of +6.80%, as a result of the greater concentration of the Canadian market in the energy sector.  

1. Indeed, the recovery of the energy sector (+15.8%), helped by the rise in oil prices, has been notable over the last three months.
2. With the exception of the utilities sector (-0.4%), all other sectors advanced during the quarter. Among these, the best performance was recorded by the health sector (+14.3%), while the most modest was registered by the telecommunications sector (+1.9%).
3. Large-cap stocks outperformed small-cap stocks again in the second quarter, as the S&P/TSX 60 and S&P/TSX Small Cap indices rose 7.1% and 6.6%, respectively.

Global Equities

Most developed world markets have gained ground in the last three months. MSCI World Index (CAD) posts a quarterly gain of 3.8%. 

1. Global equity markets rebounded in local currencies (+3.6%) in the second quarter. This performance has returned the cumulative annual performance of the MSCI World Index in positive territory.
2. US stocks performed well during the quarter, with the S&P 500 Index (USD) gaining 3.4% for the period, pushed by the information technology sector (+7.1%), representing more than a quarter of the index return.
3. Internationally, the MSCI EAFE Index has grown by 3.5% in local currency over the past three months after having experienced a difficult first quarter.
4. In the emerging markets, trade tensions between the US and China drove returns down. The MSCI EM Index in local currencies declined by 3.5% over the period.

¹ The composition of the SAI Balanced Funds Index is 40% FTSE TMX Universe, 30% S&P/TSX and 30% MSCI World.