Expect a quieter start to the markets this week, with more active trading on Friday.
That’s when quarterly TSX rebalancing occurs, notes Prab Sagoo, associate director at Nasdaq Advisory Services, in his latest weekly update. Quadruple witching is also scheduled for Friday, meaning the simultaneous expiration of stock index futures, stock index options, stock options and single stock futures.
As a result, “Expect to see heightened volumes, block activity and volatility,” he says.
In the rebalance, the TSX will see three additions: Brookfield Infrastructure Partners, Spin Master and Trican Well Service.
The Canadian economic calendar is relatively light, with the housing price index being the only item of note (Thursday). In the U.S., it’s a heavier week, with several releases: PPI, CPI, manufacturing, consumer sentiment and retail sales.
Last week’s performance
Last week, the TSX finished a shortened trading week with a 1.4% loss.
“Losses were broad and similar across the market cap spectrum, with just the utilities sector ending marginally positive,” says Sagoo. “The heavyweight materials, financials and energy sectors were some of the predominant contributors.”
The TSX lags the S&P 500 by more than 12 percentage points this year. “Sector composition is a big reason, and the market is likely also looking ahead to slower second-half growth in Canada,” says BMO senior economist Robert Kavcic in a weekly equities report.
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Sagoo notes that Canadian investors broadly reduced ETF exposure to both Canadian and U.S. equities and bonds. For example, BMO S&P 500 ETF saw its largest outflow since January 2016.
Read: Returns elude Canadian investors despite strong GDP
Why investors should step outside their comfort zones
For bonds, the Canadian and U.S. yield curves show contrasting moves, with the former shifting higher in response to the two BoC rate hikes and a better economic outlook since early July, says Sagoo.
Bright spots in U.S. despite growth hurdles