Market developments
Equities:
The S&P 500 ended the week slightly down, as tech stocks sold off, coinciding with a significant Friday options expiration with approximately $5.3 trillion in options set to expire, adding to the market’s volatility. With earnings season effectively in the rear-view mirror, attention has pivoted away from corporates and onto the Fed. Canadian markets continued their climb with another positive week as materials and energy contributed, on the back of strong gains in oil and copper.
Fixed income:
Despite concerns over inflation and the Federal Reserve’s upcoming policy meeting, economists do not expect a shift in forecasts for interest rate cuts. The week was marked by confusion and debate surrounding inflation and economic slowdown, with expectations of three rate cuts in 2024. This narrative is somewhat consistent across Canada and Europe, with expectations for a June rate cut becoming increasingly more likely. The mixed data this week led to an increase in yields across most developed markets and a drop in bond prices.
Commodities:
Oil prices remained near a four-month high, settling around $81, marking a 3.75% gain for the week. The rally was fueled by extended production cuts from OPEC and its allies, pushing the market towards a deficit. This surge followed a drop in U.S. stockpiles, the IEA’s forecast of a supply deficit for the year, and geopolitical tensions heightened by Ukraine’s attack on a Russian refinery.