indicatorFund Commentary

Sub Advisor Insights—Markets Q2 2021

Compass sub-advisors discuss the market and analyze the events during the second quarter of 2021.

By ATB Investment Management 26 August 2021 5 min read

Cardinal Capital Management Inc.

Contributed by: Cardinal Capital Management Inc.

The first half of the year closed out with many global equity markets reaching new record highs. Successful vaccination campaigns, robust economic and corporate earnings stoked confidence in the global economic outlook.

In Canada, the resilience of the economy adds optimism that the recovery will remain intact with both businesses and consumers despite further uncertainties due to the virus and its variants. While broader easing of the restrictions on the economic re-openings are still ahead of us, a sharper rebound in the economy is anticipated. Consumer spending, capital expenditures and profitability, are likely to stay on the uptrend.

Canadian stocks continued to perform well in the second quarter. The S&P/TSX index was up 8.54% for the quarter and up 17.28% for the first half of the year. The Canadian index delivered its best first half performance in over 20 years and beat many of its global peers. Gains continued to be broad based, with technology and growth stocks faring particularly well in June.


Canso Investment Counsel Ltd.

Contributed by: Canso Investment Counsel Ltd.

As inflation pushed to its highest level in more than a decade, U.S. government bond yields surprisingly retreated from their March 31st levels as positive performance became ubiquitous for the period. Government bond yields had risen sharply in the first quarter as the markets rode a wave of optimism. The Fed officials have begun discussions about ‘tapering’ bond purchases and have pushed forward the time frame when they expect to raise interest rates. Many investors agree with the Fed that this high inflation is transitory and related to the reopening of the economy.

In Canada, the second wave of the virus did not dent the strong economic recovery. Consumers and businesses are adapting to containment measures, and housing market activity has been much stronger than expected. Improving foreign demand and higher commodity prices have also brightened the prospects for exports and business investment.

Financial markets pushed higher in the second quarter and major equity markets printed record highs. The appetite for risk extended into fixed income with strong returns in the more speculative high yield market. Spread narrowing was muted in the investment grade segment and the Corporate Index underperformed the Government heavy and longer duration Universe Index. Higher quality bond markets rallied off the first quarter drawdown following the decline in longer term government bonds yields. Despite this rebound, Government bond markets remain negative through the first half of 2021 with yields still markedly higher than the pandemic lows. Spread narrowing has helped to insulate corporate bonds and produce a positive 0.8%return for the Corporate Index.


Cidel Asset Management Inc.

Contributed by: Cidel Asset Management Inc.

The Canadian equity market posted another strong quarter, returning 8.5%. The performance of the S&P/TSX was entirely due to positive earnings estimate revisions, while the forward 12-month price-to-earnings ratio remained relatively constant. From a sector perspective, there was a reversal amongst the best and worst performing sectors from the first quarter. The Information Technology sector (one of the worst performing in the first quarter) was the S&P/TSX Index’s leading sector up 23%. Long-term bond yields were down in the quarter, which helped high-valuation-high-growth equities. Shopify was a prime example of this phenomenon, up 31% during the quarter. Canada’s ‘meme-stock’, Blackberry, was the best performer in the Information Technology Sector, up 44%. Moving in the opposite direction was the Healthcare sector, which went from the best performing sector in the first quarter, to the worst in the second quarter, declining 11%. As a reminder, the S&P/TSX Healthcare care sector consists primarily of cannabis producers, which continue to struggle with profitability. Other notable performance came from the Energy sector, up 14%, adding to its strong first quarter. Oil was up 24%, but natural gas surpassed oil with a spectacular 40% rise during the quarter.


Mawer Investment Management Ltd.

Contributed by: Mawer Investment Management Ltd.

The positive performance of global equities continued into the second quarter of 2021 as economic growth expectations picked up in parts of the world, though the recovery in some regions faced headwinds due to an uneven vaccine roll-out.

Inflation continued to remain top-of-mind for investors and central banks. While indicators of inflation have risen, pundits disagree whether they are merely temporary or will be sustained. At the same time, the level of long-term interest rates in most of the world’s major economies stabilized after moving higher in the first quarter. Given the economic recovery and signs of rising inflation, central banks in many countries have begun laying out timelines to normalize monetary policy, such as increasing policy rates and eliminating asset purchase programs.

  1. The commentary provided herein was written and contributed by Sub-managers to the Compass Portfolios and ATBIS Pools and was compiled by ATB Investment Management Inc. (“ATBIM”). This report is being provided for information purposes only and is not intended to replace or serve as a substitute for professional advice, nor as an offer to sell or a solicitation of an offer to buy any investment. Although the information has been obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is made as to their accuracy or completeness and ATBIM does not undertake to provide updated information should a change occur.

    Any performance data provided for mutual funds assumes reinvestment of distributions only and does not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that may reduce returns. Mutual Funds are not insured by the Canada Deposit Insurance Corporation, nor guaranteed by ATBIM, ATBSI, ATB Financial, the province of Alberta, any other government or any government agency. Commissions, trailing commissions, management fees, and expenses may all be associated with mutual fund investments. Read the fund offering documents before investing. Unit values of mutual funds will fluctuate and past performance may not be repeated. The Compass Portfolios and ATBIS pools include investments in other mutual funds. Information on these mutual funds, including the prospectus, is available on the internet at

    Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in investment products that seek to track an index.

    ATBIM and ATB Securities Inc. are wholly owned subsidiaries of ATB Financial and are licensed users of the registered trademark for ATB Wealth. This document may not be reproduced in whole or in part; referred to in any manner whatsoever; nor may the information, opinions, and conclusions contained herein be referred to without the prior written consent of ATBIM. ATB Financial, ATB Investment Management Inc. and ATB Securities Inc. do not accept any liability whatsoever for any losses arising from the use of this document or its contents.

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