Canadian investors gird for `pretty volatile' fourth quarter
Canada's stock market is on pace for its first monthly loss since the coronavirus pandemic rocked global markets in March, signalling investors should brace for a wild ride ahead.
The problem today, as it was in the spring, is the spread of COVID-19. Virus cases are rising rapidly in parts of the world that seemed to have the problem under control — including Canada. That's a negative for the country's growth outlook, and for a market that's laden with commodities and bank shares, making it highly sensitive to the global outlook as well.
COVID-19 cases have hit a record high in European countries with some imposing new lockdown restrictions. Closer to home, Prime Minister Justin Trudeau said a second virus wave has started in Canada's four biggest provinces. A resurgent dollar has seen gold give up some of its gains, forcing investors to question whether the safe haven asset is facing an even bigger slump as stimulus talks in the United States stall. And uncertainty around the next leader of the world's largest economy is also adding to worry.
Anxiety splayed across the Canadian stock market this month is an indication of what the final months of the year could look like for investors. “As we move into the fourth quarter, it sets up for a pretty volatile quarter,” said Chris Kerlow, portfolio manager at Richardson GMP. “A big part of the near-term volatility has been the spike in virus cases.”
Down about three per cent so far this month, the S&P/TSX Composite Index has about 72 per cent of its stocks in the red.
Prior to September, the benchmark had five consecutive months of gains. Now, that rally stands on shaky ground.
Making up a whopping 65 per cent of the Canadian market, tech, financials and commodities-related stocks are among the biggest losers in September.