Weekly economic review

Sébastien Mc Mahon, CFA

Senior Portfolio Manager, Diversified Funds & Economist

03/13/2020

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Stay informed:

www.ia.ca/economy

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A look at this week’s marketsAt the close on Thursday

Source: iA Economics, data via Bloomberg *WTD/YTD = Week-to-date / Year-to-date

Week-to-date Year-to-date

Canadian Bonds (total return) Local currency In CAD Local currency In CAD

FTSE TMX Universe -2.31% 4.10%

FTSE TMX Long -5.60% 5.12%

Corps -3.12% 1.55%

Equities (total return)

S&P/TSX -22.61% -26.27%

S&P 500 -16.51% -13.35% -22.91% -17.36%

MSCI EAFE -15.97% -14.62% -25.35% -21.19%

MSCI Emerging -11.32% -9.42% -17.08% -14.92%

Other Current price Return WTD* Return YTD*

Oil (WTI) 31.50 $ -23.69% -48.41%

USD/CAD 0.7181 $ -3.64% -6.71%

Gold 1 576.15 $ -5.84% 3.88%

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Stock markets:Tough times as global markets enter a « bear market »

Source : WSJ & Bloomberg

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Wall Street:The swiftest fall into a « bear market » in history!

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Wall Street:The fear index at extreme levels, expect volatility to stick around for a while…

Source : CNN & Strategas

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Wall Street:… but within this volatility, lies opportunity for long-term investors

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Coronavirus:Seemingly under control in China, still growing around the world

Source : WSJ

China

Ex-China

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Oil market: Price warA game changer!

Source : Bloomberg & WSJ

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Result:The credit market is also under pressure

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Federal Reserve:Injection of over 1 Trillion dollars of liquidity

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Central Banks:ECB and BoE followed with their own interventions

European Central Bank President Christine Lagarde unveiled a

calibrated package of stimulus, spearheading the region’s financial

response to the coronavirus with measures intended to “surgically”

support key parts of the euro-area economy.

Warning of a “major shock” to the prospects for global growth,

Lagarde and her colleagues crafted what she called a

“comprehensive” program to support activity by helping

companies to stay in business and banks to keep lending. –

Bloomberg, 12 mars 2020

The Bank of England unveiled stimulus including its first

emergency interest-rate cut since the financial crisis, a move

coordinated with the government’s fiscal response to prevent the

coronavirus outbreak from crippling Britain’s economy.

Policy makers delivered a half-point reduction to take their key

rate to 0.25%, introduced a new program to provide easy and

cheap credit, and reduced a special capital buffer to give

banks even more room to lend. – Bloomberg, 11 mars 2020

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Reactions of governmental authorities :Fiscal stimulus announcements abound, while President Trump creates some confusion

Source: WSJ, CNBC, Bloomberg

China:

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Result:The yield curve is steepening

Source : iA Economics, data via Bloomberg

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Global economy: ConclusionThe impact on growth could be deeper than we expected

U.S. Real GDP Growth Forecast

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What we’ll be watching next week

• Canada:

Manufacturing Sales (last month: -0.7% in December)

CPI Inflation (last month: +2.4% YoY in January)

Retail Sales (last month: +0.0% MoM in December)

• U.S.:

Empire Manufacturing Index (consensus: lower at 5.1 in March)

Retail Sales (consensus: stable at +0.2% MoM in February)

FOMC Rate Decision (consensus: 50 bps rate cut)

Existing Home Sales (consensus: higher to 5.55M in February)

• Europe:

ZEW Survey Expectations (last month: 10.4 in February)

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To reach and follow us:

www.ia.ca/economy and LinkedIn

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Disclaimer

Opinions expressed in this presentation are based on actual

market conditions and may change without prior warning. The

aim is in no way to make investment recommendations. The

forecasts given in this presentation do not guarantee returns and

imply risks, uncertainty and assumptions. Although we are

comfortable with these assumptions, there is no guarantee that

they will be confirmed.

Industrial Alliance Insurance and Financial Services Inc.