Please select your language preference on the right hand side

Languages - Canada

  • English
  • Français
Back
Regions
Language
  • English
  • Français
Skip to signin Skip to main content Skip to footer
Sun Life Global Investments logo
  • CANADA | EN
  • Investments
    • Overview
    • Sun Life Granite Solutions
    • Sun Life Multi-Strategy Solutions
    • Sun Life MyRetirement Income
    • Sustainability-focused investing
  • Team & approach
    • Investment Team & Resources
    • Core Beliefs
    • ESG integration
  • News & insights
    • All
    • Insights
    • In the media
    • News & announcements
    • Sustainability
  • Sustainability
    • Commitment
    • Responsible investing
    • Climate action
    • Diversity, equity & inclusion
    • Governance & engagement
  • About us
    • Overview
    • Institutional Business Team
Sign in
Skip to signin Skip to main content Skip to footer
sunlife logo
Sign in
  • News & insights
    • Back
    • News & insights
    • News & insights
    • Commentary
      • Back
      • Commentary
      • Premier marché baissier pour les obligations depuis une génération
    • Insights
      • Back
      • Insights
      • Climate change affects us all
      • As the Bank of Canada slows the pace of rate hikes, high quality bonds may offer a haven
      • Will market volatility continue?
      • Has inflation peaked and what now?
      • Why does income diversification matter?
      • Housing and jobs data point to a looming recession
      • The demise of RRBs in Canada
      • 2023 corporate earnings may be in trouble as consumers lose confidence and inflation fades
      • Bonds: the worst is behind us
      • Q4 2022 | Market Update
      • Why interest rates may stay higher for longer than markets expect
      • Why it’s vital to consider low probability investment risks
      • Silicon Valley Bank and U.S. Regional Bank Fallout – What it means for Canadian investors
      • Why Canadian banks are largely immune to a bank run
      • Q1 2023 Granite Funds Update
      • What’s next for rates, recession & the banking sector
      • Q1 2023 | Market Update
      • Will stocks & bonds move again in opposite directions to strengthen balanced portfolios?
      • Recession investing tips
      • Three reasons to own bonds
      • Q2 2023 | Market Update
      • 2024 Market Outlook
      • Federal Budget 2024
      • Q1 2024 | Market Update
      • Q2 2024 | Market Update
      • Granite funds Q2 2024 CIO views
      • Sun Life Granite Target Date Funds – Q2 2024
      • Q3 2024 | Market Update
      • U.S. election insights
      • Sun Life Granite Target Date Funds – Q3 2024 CIO Views
      • Granite funds Q3 2024 CIO views
      • Q4 2024 | Market Update
      • Sun Life Granite Target Date Funds – Q4 2024 CIO Views
      • CIO views - What's ahead for 2025?
      • Sun Life Granite Target Risk Funds Q4 2024 CIO Views
      • Sun Life Granite Target Date Funds – Q1 2025 CIO Views
      • Granite Funds Q1 2025 CIO Views
      • The power of diversification to offset volatility
    • In the media
      • Back
      • In the media
      • Why this portfolio manager is proceeding with caution
      • How to position portfolios if inflation is turning the corner
      • A look at target-date fund managers’ varying approaches to ESG investing
      • Oricia Smith named among Canada’s Most Powerful Women: Top 100 Award Winners
      • How do central banks pause without looking overly dovish?
      • How can the investment industry achieve ESG clarity?
      • Still cautious on equities but finding opportunities in Canadian government bonds
      • Market sentiment is optimistic, high quality bonds are a good hedge during recessions: Strategist
      • We prefer the U.S. for some sectors, while looking at Canada for others: Strategist
      • To keep inflation in check, overtightening may be necessary, invest in bonds: Strategist
      • Don’t neglect bonds this year despite tough 2022, PMs say
      • Oricia Smith – Changing the face of asset management
      • We continue to stay away from cyclical stocks: Strategist
      • Why this portfolio manager is proceeding with caution
      • Bond over stocks, U.S. stocks over TSX amid current market environment: Strategist
      • This is a good opportunity to take some profits, move to a defensive positioning: Strategist
      • There's reason to be a little bit optimistic about interest rates: Portfolio manager
      • How much more dovish can the BoC be before its divergent approach affects loonie?: Strategist
      • Cautious on stocks, finding opportunities in fixed income
      • Balanced portfolios: why diversification is key for investing success
      • High quality bonds as a hedge against risk: Strategist
      • What happens if the U.S. debt ceiling is not raised?
      • 'No reason to panic' about your 60-40 portfolio
      • BPM Roundtable: Net Zero Promises Investment Opportunities
      • S&P 500 bull market led by AI, shows investors are getting ahead of themselves
      • 'Not advocating going overly defensive' with investments: Portfolio Manager
      • Main sector contributors to TSX earnings to be Staples and Financials: Strategist
      • Women in Leadership 2023: Anne Meloche
      • Choosing the right glidepath for the best possible retirement outcome
      • 2023 DC Investment Forum: Target-date fund glide paths evolving for better retirement outcomes
      • Adapting to change: how target-date funds evolve to safeguard your financial future
      • Women Leaders in the Benefits, Pensions, and Institutional Investments Industry | Elite Women
      • A framework for ESG in DC plans
      • Retirement realities: Canadians want a solution to the pension puzzle
      • 2024 DC Investment Forum: Simplifying Retirement
      • Inside a liquid, income-paying strategy for DC members
      • Improving the retirement crisis through decumulation
      • Inside a career "built on meritocracy"
    • News and announcements
      • Back
      • News and announcements
      • Jacques Goulet, President of Sun Life Canada, named CEO of the Year
      • Sun Life announces establishment of SLC Management
      • Exposure change within Sun Life Multi-Strategy Bond Fund
      • Oricia Smith appointed President, SLGI Asset Management Inc. and Senior Vice-President, Investment Solutions, Sun Life Canada.
      • Sun Life Global Investments expands investment management team with a focus on multi-asset solutions and responsible investing
      • Sun Life Global Investments joins the Net Zero Asset Managers initiative
      • Markets evolve So do our Granite portfolios
      • Our commitment to achieving net-zero greenhouse gas emissions by 2050 or sooner
      • Women inspiring women. Paving the way for a brighter future.
      • Introducing Sun Life MyRetirement Income
      • Changes to the Institutional Business team
    • Sustainability
    • No two ESG ratings are the same
    • Federal Budget 2023
    • Karl William Gagné has joined Sun Life Global Investments
    • Granite Target Risk Funds - Q2 CIO Views
    • Granite TDFs – Q2 CIO Views
    • Rates, recession and rallies - What now?
    • Q3 2023 | Market Update
    • Granite Funds - Q3 CIO views
    • Q4 2023 | Market Update
    • Target date funds: solving for better retirement outcomes
  • Investment solutions
    • Back
    • Investment solutions
    • Investment solutions
    • Sun Life Granite Solutions
    • Sun Life Multi-Strategy Solutions
    • Sustainability-focused Investing
    • Sun Life MFS Diversified Income Fund
    • Granite Target Date Funds
    • Sun Life MyRetirement Income
  • Team and approach
    • Back
    • Team and approach
    • Team and approach
    • Investment Team & Resources
    • Core Beliefs
    • ESG Integration
      • Back
      • ESG Integration
      • A deeper look at ESG integration
    • ESG Commitment
  • About us
    • Back
    • About us
    • About us
    • Institutional Business Team
    • Social media disclosure
  • signin
    • Back
    • signin
    • signin
    • slgiinst
      • Back
      • slgiinst
      • Sign in
  • Sustainability commitment
    • Back
    • Sustainability commitment
    • Sustainability commitment
    • Responsible Investing
      • Back
      • Responsible Investing
      • Stewardship
    • Governance & engagement
    • Diversity, Equity & Inclusion
  • Two-Step Verification
  • CANADA | EN

    Please select your language preference on the right hand side

    Languages - Canada

    • English
    • Français
    Back
    Regions
    Language
    • English
    • Français
  1. Home
  2. News & insights
Share this:
  • Share this on Facebook
  • Share this on Twitter
  • Share this on Linkedin

News & insights

October 26, 2022

Q3 2022 | Market Update

Market’s rollercoaster ends Q3 with a sharp decline amid central banks commitment to higher rates for longer

Opinions as of September 30, 2022

Highlights

  • Central banks across the world are moving in unison in hiking interest rates to cool demand.
  • Inflation remains quite elevated, far above the Fed’s 2% target.
  • After a rally early in the third quarter, markets began to price out the Fed’s pivot and tumbled accordingly.
  • Recession probability has been revised upwards.
  • Equity markets dropped sharply with the S&P 500 down 24% and the Nasdaq down 32% for the 9 months as of the end of September 2022.
  • The 10-year U.S. Treasury yield spiked to 3.83% by the end of September while the yield on the two-year U.S. Treasury ended the quarter at 4.2%. 

Market’s rollercoaster ends Q3 with a sharp decline amid central banks commitment to higher rates for longer

Global financial markets extended their losses in the third quarter. A combination of central banks around the world hiking rates, persistent inflation, currency, and bond market volatility, and rising geopolitical concerns produced a massive selloff across all markets.

The quarter started off with a rally fueled by signs of inflation peaking, and expectations that the U.S. Federal Reserve (the Fed) could soon end its rate-hiking cycle, and pivot to lowering rates due to slowing growth. U.S. Inflation figures dropped to 8.3% in July, down from the 9.1% in June. Investors viewed the signs as encouraging and, as a result, markets rallied. Then came the Jackson Hole Symposium in late-August, where U.S. Fed chairman Jerome Powell’s commented that rates are going to stay higher for longer, even if it may cause pain to businesses and households. Markets got spooked and the selloff frenzy ensued throughout the rest of the quarter, wiping out all previous gains from July. U.S. August inflation data came in at 8.3%. Although headline inflation was lower, core inflation was significantly higher. A higher core inflation, which discounts the volatile contribution from food and energy prices, is concerning for the Fed and markets participants alike, thus exacerbating the selloff.

As central banks across the world reiterated their stance of aggressively hiking interest rates in response to persistent high inflation, risks of a global recession became elevated, particularly in the Eurozone. The U.S., UK, and Canada also saw their probability of a recession increase.

Equity markets were down sharply.

  • The S&P 500 ended the quarter down 4.9% and down 24% year-to-date (YTD)
  • The Dow Jones Industrial Average ended the quarter -6.2% and -20% YTD
  • The Nasdaq 100 ended the quarter -4.4%, and -32.3% YTD
  • The S&P TSX Composite ended the quarter -2.2 and -13.1% YTD
  • Internationally, the MSCI EAFE ended the quarter -9.3% and -26.7% YTD

Chart 1: Major markets take a hit in Q3
Total return, indexed to 0 as of January 1, 2022

Source: Bloomberg. Data as of September 30, 2022.

Fixed income markets did not provide any safety from the decline in equities. Most bond markets posted negative returns. Global sovereign bonds were sharply down after the UK’s fiscal policy statement included a tax cut for the wealthy. The news was negatively received by markets, and the British pound fell to an all-time low against the U.S. dollar.

  • The 10-year U.S. Treasury yield spiked to 3.83% by the end of September
  • The yield on the two-year U.S. Treasury ended the quarter at 4.2%

The yield curve is now quite significantly inverted, which is a commonly accepted sign of a looming recession.

Source: Macrobond. Data as of September 30, 2022.

Equities: Underweight cyclical equities and trimmed U.S. equity exposure

We are concerned about an earnings recession in a slowing growth environment. We believe the U.S. has entered a slowing growth period, and the picture in Europe looks even more dire. Markets will continue to pay close attention to the Fed’s actions for direction. Moreover, a strong U.S. dollar could spell trouble for corporate earnings. Although supply chains issues have begun to normalize, we see signs of weakening demand. This shows that the Fed’s tightening actions are beginning to trickle into the demand side. We continued to take advantage of the equity rally to trim our exposure to U.S. equities and increased our cash exposure. Our positioning also favours defensive equities over cyclicals.

 

Fixed Income: Overweight cash in light of rising yields as central banks move to rein in inflation

With monetary policy expected to stay tighter for longer, we expect credit markets to remain quite volatile. Corporate default rates are still quite low, although they may move up during an economic slowdown. The high yield space, particularly, has not fully priced in the probability of a recession in our view. As a result, we tactically removed sensitivity towards high yield spreads. We remain overweight Canadian bonds as our outlook for Canadian core bonds is positive. We expect to deploy cash into fixed income with more favourable valuations and yields.

Follow Sun Life Global Investments Institutional on LinkedIn.

All investment solutions are offered as segregated funds for group retirement plans exclusively by Sun Life Assurance Company of Canada, through Sun Life Group Retirement Services, a member of the Sun Life group of companies.

 

Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada, and Sun Life Financial Trust Inc. 

SLGI Asset Management Inc. is the investment manager of the Sun Life Mutual Funds.

© SLGI Asset Management Inc. and its licensors, 2024. SLGI Asset Management Inc. is a member of the Sun Life group of companies. All rights reserved.

  • Legal
  • Privacy
  • Security
  • Fraud
  • Accessibility

This content is intended for Institutional Investors Only (Plan Sponsors, Consultants & Group Advisors).