Economic activity has accelerated and is expected to remain strong into the third quarter of 2021, largely due to vaccination progress, economic re-opening, and large-scale fiscal stimulus. The U.S. is expected to be the principal driver of growth, followed closely by Europe as April restrictions are eased.

While the demand side of the global economy is heating up, the global growth boom underway is creating bottleneck pressures. Factory output has struggled to keep up with demand due to pandemic-related restrictions and shortages of intermediate inputs. Much of the year-over-year price increase can be attributed to base effects, coming off the low point for demand that occurred one year ago. The remainder of this recent inflation push is due to temporary factors such as stimulus-driven demand and supply chain restraints. The Fed and other developed global central banks have indicated that easing has reached a peak. Taper has started at the Bank of Canada and the Bank of England. As we monitor the recovery, we are aware that the global labor market is slow to heal, with the U.S. still 10 million jobs short of pre-pandemic levels.1 We have maintained our economic outlook of three months of Growth followed by Stagnation for the remainder of our twelve-month forecast horizon.

The Chinese economy advanced 18.3% year-on-year in the first quarter of 2021, boosted by strengthening domestic and global demand, strict virus containment measures, and continued fiscal and monetary support, and accelerating sharply from a 6.5% growth rate in the fourth quarter.2 China’s surveyed urban unemployment rate eased to 5.1% in April, compared to 5.3% in March and 6.0% in the same period last year.3

The Euro Area economy shrank 0.6% in the January-March quarter entering a double-dip recession, as several countries across the region imposed social distancing and lockdown measures to curb the spread of the coronavirus pandemic. Among the bloc’s largest economies, Germany, Italy, Spain, and the Netherlands fell back into contraction territory, while France’s economy returned to growth as the government delayed the imposition of lockdown.4

The U.S. economy grew by an annualized 6.4% in the first quarter, following a 4.3% expansion in the previous three-month period.5 With Janet Yellen and Jay Powell heading up macroeconomic and central bank policymaking, and with U.S. rates at the lower bound and the Fed having adopted Average Inflation Targeting, 2021 is likely to bring previously unseen coordination between the fiscal arm of the federal government and the central bank. Increases in personal consumption expenditures (PCE), non-residential fixed investment, federal government spending, residential fixed investment, and state and local government spending were partly offset by decreases in private inventory investment and exports.6 U.S. core consumer prices rose 3.0% in April 2021, the largest annual increase since January 1996.7

The U.S. Labor Department released soft jobs data for April 2021 showing an increase of 266,000, versus estimates for a 1 million gain.8 Canada’s job recovery hit a snag in April as a third wave of lockdowns across most provinces, including Ontario, led to fresh employment losses. The country shed 207,100 jobs in April, partially erasing large gains over the previous two months. The unemployment rate rose to 8.1% in April, from 7.5% a month earlier. Canada’s economy remains about half a million jobs shy of pre-pandemic levels.9

U.S. equities ended April on a positive note, with the S&P 500 posting a gain of 5.3%. Smaller caps also posted gains, with the S&P MidCap 400 and the S&P SmallCap 600 up 4.5% and 2.0%, respectively. U.S. fixed income performance was positive across the board. Canadian equities posted gains in April, with the S&P/TSX Composite up 2.4%. The S&P Europe 350 rose 2.2%, lifting its year-to-date return to 11.0%. The S&P United Kingdom outperformed, rising 4.0%, however the bulk of the European benchmark’s return was due to France, while Italy was a notable exception. Asian equities posted gains in April, with the S&P Pan Asia BMI up 1.8%. Most Asian single-country indices posted gains. Gold’s ability to protect against more than increases in the general price level suggests that its long-term real returns should be positive.

Equity exposure across all models reflects our view that markets are looking through the uncertainty of the pandemic and towards the resumption of more normal life once populations are vaccinated. In May, we maintained the asset allocation that we established in April. Fiscal spending that funds local governments supports our exposure to treasuries and municipal bond exposure in the U.S. We continue to include exposure to gold as a portfolio stabilizer.

The economic reopening and the global stimulus that is underway will lead to improved household liquidity, healthy consumer balance sheets, and a healing labor market. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.


Deborah Frame, President and CIO


1 U.S. Bureau of Labor Statistics. May 7, 2021.

2 Trading Economics. China GDP. April 16, 2021.

3 Trading Economics. China Unemployment National Bureau of Economics. May 11, 2021.

4 Trading Economics. Europe GDP. May 18, 2021.

5 Trading Economics. U.S. GDP. April 29, 2021.

6 Trading Economics. U.S. Inflation, U.S. Bureau of Economics. May 12, 2021.

7 Trading Economics. U.S. Inflation, U.S. Bureau of Labor Statistics. May 12, 2021.

8 Trading Economics. U.S. Employment, U.S. Bureau of Labor Statistics. May 7, 2021.

9 Trading Economics. Canadian Employment, Statistics Canada. May 7, 2021.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. April 30, 2021. Index performance is based on total returns and expressed in the local currency of the index.