TORONTO--(BUSINESS WIRE)--Canadian defined benefit plans generated modest investment gains in the second quarter of 2019, with the median plan posting a return of 2.5 percent for the quarter, according to data from the Northern Trust Canada Universe. Plans recorded a second consecutive quarter of positive performance despite a stock market sell-off in May due to concerns over U.S.-China trade talks and weaker global growth.
The Northern Trust Canada Universe tracks the performance of Canadian institutional investment plans that subscribe to performance measurement services as part of Northern Trust’s asset servicing offerings.
Trade and global growth concerns contributed to equity volatility in major developed markets, and the U.S. Federal Reserve signaled the possibility of interest rate cuts in the near future, after refraining from a rate cut at its June meeting. Canada’s unemployment rate reached its lowest level in 43 years at 5.4 percent in May but edged up slightly to 5.5 percent in June.
“In the midst of uncertainty surrounding trade policies coupled with a mixed economic climate, Canadian pension plans continue to generate positive investment returns in the second quarter of 2019. Year-to-date, the median return is positioned at 9.9 percent versus 2.9 percent the same time last year,” said Arti Sharma, President and CEO of Northern Trust Canada.
Canadian Equities as measured by the S&P/TSX Composite Index rose 2.6 percent in the second quarter. Seven of the index’s eleven sectors achieved positive returns with information technology stocks leading the gains. The health care sector posted the weakest results as stocks in cannabis companies retreated from their stellar returns in the first quarter.
U.S. equity markets buoyed by strong GDP growth, consumer spending and expectations for future interest rate cuts pushed market indices to new records with the S&P 500 returning 2.0 percent in CAD (4.3 percent in USD). Economically-sensitive stocks including those from information technology generally performed stronger than defensive stocks.
The MSCI EAFE Index, which measures the performance of international developed markets, returned 1.7 percent in CAD in the second quarter. The ongoing trade and slower global growth showed the vulnerability of export-oriented economies such as Japan and Europe. Shares in the U.K. performed well over the quarter in local currency (MSCI UK 3.3 percent in GBP), despite ongoing Brexit-related uncertainty and the resignation of Prime Minister Theresa May.
Escalating U.S.-China trade tensions caused emerging market stocks to lag against their developed market counterparts. The MSCI Emerging Market index posted a return of -1.5 percent in CAD for the quarter. Eight of the 11 sectors within the index posted negative returns. Stocks in the Chinese information technology sector were hit especially hard amid reports that the Trump administration was considering penalizing more Chinese technology companies while placing Huawei Technologies on a blacklist.
The Bank of Canada (BoC) kept its overnight rate target at 1.75 percent through the second quarter of 2019. Amid domestic challenges and a global slowdown, the BoC lowered the GDP growth forecast for 2019 from 1.7 percent to 1.2 percent. The FTSE Canada Universe Index returned 2.5 percent, with long term bonds outperforming short and mid term bonds. Provincial and Corporate bonds witnessed positive returns and outperformed the Federal segment of the Universe.
Northern Trust – Canada
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About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 20 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2019, Northern Trust had assets under custody/administration of US$11.3 trillion, and assets under management of US$1.2 trillion. For more than 125 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Please visit our website or follow us on Twitter.
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