Market volatility returned in September as China’s Evergrande debt crisis, the global prospect for higher taxes, U.S. debt ceiling uncertainty, and upcoming tapering by the Federal Reserve elevated risk. With these events considered, our outlook continues to expect the global recovery to continue. In September we maintained our twelve-month forward forecast of Growth (U.S. GDP greater than 2.5%) through the period.

The Chinese economy advanced 7.9% year-on-year in the second quarter of 2021, slowing sharply from a record 18.3% growth in Q1.1 A slowdown in factory activity, higher raw material costs, and new COVID-19 outbreaks in some regions weighed on the recovery momentum. China’s jobless rate of the population aged 16-24 fell to 15.3% from 16.2% in July.2

Eurozone quarterly economic growth was revised higher to 2.2% in the second quarter of 2021, a rebound following two consecutive periods of contraction, helped by the rapid pace of COVID-19 vaccinations. The Eurozone annual inflation rate was confirmed at 3.0% in August, well above the European Central Bank’s target of 2.0%.3 The unemployment rate in the Euro Area edged down to 7.6% in July 2021 from an upwardly revised 7.8% in June. Spain (14.3%) and Greece (14.6%) remained the two EU countries with the highest unemployment rate.4

The U.S. economy advanced an annualized 6.6% in the second quarter.5  The annual inflation rate eased to 5.3% in August from a 13 year high of 5.4% in July. A slowdown was seen in the cost of used cars, trucks, and transportation services while inflation was steady for shelter and apparel.6 Core inflation in the U.S. is on track to exceed 2% in 2021, fulfilling one of the conditions for raising interest rates. At the September Federal Open Market Committee meeting, the central bank indicated that it could begin tapering as soon as November, noting that the “liftoff” for rate hikes would likely not commence until after the taper process is complete. The U.S. unemployment rate dropped to 5.2% in August, the lowest level since March 2020, despite reports of labor supply shortages and concerns over the lingering threat of the COVID-19 resurgence.7 The Canadian economy shrank 0.3% in the second quarter 2021, ending three consecutive quarters of expansion. International supply chain disruptions have constrained imports of parts mostly for the auto sector and led to a decrease in exports. On a positive note, business inventories, government expenditure, business investment in machinery and equipment, and investment in new home construction and renovation were all higher.8 The unemployment rate in Canada fell for the third straight month to 7.1% in August of 2021 from 7.5% in July.9 The annual inflation rate in Canada accelerated to 4.1% in August from 3.7% in July. It was the highest inflation rate since March of 2003.10

In the U.S., the S&P 500 posted a gain of 3.04% in August, as the Fed’s dovish tone, combined with strong earnings reports, helped the market. While mega-caps led, mid and small-caps also posted gains, with the S&P Mid-Cap 400 and the S&P Small Cap 600 up 2.0% and 2.02%, respectively. U.S. fixed income performance was mostly negative. Canadian equities posted gains in August, with the S&P/TSX Composite up 1.6%. The S&P Europe 350 added 2.1% in August, for a seventh consecutive month of increases. The Netherlands accounted for nearly a third of the European benchmark’s return. Asian equities gained in August, with the S&P Pan Asia BMI up 2.5%. India was the top performing country.  Hong Kong and Korea lagged, as foreign investors redirected flows into Indian and other emerging market equities as a result of a regulatory crackdown in China. Globally, commodities posted losses, driven by weakness in Energy.

In September, we adjusted our asset allocation for all portfolio models. In the Conservative and Moderate Growth models we added exposure to Canadian equities while reducing exposure to Gold. In the Growth and Aggressive Growth models, we sold the entire exposure to Australian equities and replaced it with exposure to Canadian equities. This change was driven by the improving outlook for Canada as it emerges from the pandemic. Fiscal spending that funds local governments supports our exposure to treasuries and municipal bond exposure in the U.S. We continue to include gold in the asset allocation as a portfolio stabilizer during volatile equity markets.

Our outlook hinges on whether the sources of recent disappointment are transitory. The rapid spread of the coronavirus delta variant, supply-chain disruptions, the shortage of workers, and a cooling housing market are seen to be limiting full recovery potential currently. The changing picture of the economy comes with structural changes that will challenge some sectors while at the same time, the reopening is expected to lead to improved 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 Trading Economics. China GDP, National Bureau of Statistics of China. July 15, 2021.

2 Trading Economics. China Unemployment. September 9, 2021.

3 Trading Economics. Europe Inflation. September 17, 2021.

4 Trading Economics. Europe Unemployment. September 17, 2021.

5 Trading Economics. U.S. GDP, U.S. Bureau of Economic Analysis. August 26, 2021.

6 Trading Economics. U.S. Inflation. September 14, 2021.

7 Trading Economics. U.S. Unemployment. September 3, 2021.

8 Trading Economics. Canada GDP. August 31, 2021.

9 Trading Economics. Canada Unemployment. September 10, 2021.

10 Trading Economics. Canada Inflation. September 9, 2021.


Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. August 31, 2021. Index performance is based on total returns and expressed in the local currency of the index.