Year-to-date gains reached 6.8% as equity markets rebounded across most regions
Canadian defined benefit pension plans posted a median return of 6.6 percent in the second quarter, lifting their year-to-date gain to 6.8 percent as equity markets rebounded.
The results, tracked by the Northern Trust Canada Universe, came as broad equity markets outside Canada delivered double-digit returns, with emerging markets leading the way and Canadian stocks and bonds also finishing the period higher.
The universe measures the performance of Canadian institutional defined benefit plans that subscribe to Northern Trust's performance measurement services.
“Canadian pension plans delivered solid results during the second quarter as markets rebounded and investors looked through a challenging geopolitical backdrop,” said Katie Pries, country executive for Northern Trust Asset Servicing in Canada.
According to the firm, the equity rebound drew on corporate fundamentals, relatively strong earnings and renewed enthusiasm for artificial intelligence.
Markets also responded to news of a potential peace agreement in the Middle East, which pushed energy prices lower late in the quarter, easing inflationary pressure and pulling bond yields down.
Emerging markets recorded their strongest quarter since 2009.
The MSCI Emerging Markets Index gained 26.2 percent in Canadian dollar terms, powered by a 76.2 percent surge in information technology as tech-heavy Taiwan and Korea benefited from gains in memory and semiconductor stocks.
The energy and consumer discretionary sectors posted the largest declines.
US equities also advanced, with the S&P 500 up 17.1 percent in Canadian dollar terms.
Every sector gained ground except energy, which fell by double digits as oil prices declined, though it remained up double digits year-to-date.
International developed markets, measured by the MSCI EAFE Index, returned 12.9 percent, again led by information technology with energy the sole decliner.
Canadian equities lagged their global peers but still finished positive, with the S&P/TSX Composite Index rising 7.0 percent.
The financials, health care and industrial sectors led, while materials, communication services and energy fell.
On the fixed income side, the FTSE Canada Universe Bond Index returned 2.0 percent.
Provincial bonds outperformed federal and corporate issues, and long-term bonds outpaced their mid-term and short-term counterparts.
Central banks moved in different directions over the quarter.
The Bank of Canada held its overnight rate at 2.25 percent, citing dual risks: weak economic activity and persistent uncertainty over US trade policy on one side, and elevated energy costs tied to the Middle East conflict on the other.
The US Federal Reserve kept rates between 3.5 percent and 3.75 percent.
The newly appointed Fed chair, Kevin Warsh, stressed the committee's focus on price stability while voicing confidence that growth could continue without stoking excess inflation.
Elsewhere, policymakers leaned toward tightening as energy-driven inflation climbed.
The European Central Bank raised its deposit facility rate to 2.25 percent in June with inflation above 3 percent, and the Bank of Japan lifted its benchmark to a three-decade high of 1 percent as a weaker yen and higher energy costs pushed up living expenses.
The Bank of England held at 3.75 percent.
Its governor, Andrew Bailey, said the drop in oil prices was encouraging but warned that four months of higher energy prices pointed to “inflationary pressures in the pipeline.”
The People's Bank of China left its one- and five-year loan prime rates at 3.0 percent and 3.5 percent for a 13th consecutive month.
Domestic data reflected the energy swings.
Canadian inflation jumped in May on higher gasoline and energy costs, then retreated to a headline rate of 2.8 percent in June after the ceasefire between the US and Iran brought prices down.
Job growth started slowly but strengthened in May and June, and the unemployment rate edged down to 6.5 percent from 6.7 percent in March.
In the US, inflation fell to 3.5 percent in June, its first decline in five months, while unemployment slipped to 4.2 percent from 4.3 percent.
