Category: TSX Market

The TSX rebounded on Thursday after sharp sell-offs this week due to the surge in COVID cases. Materials and financial stocks led the rally and gained more than 1% each. However, energy, reflecting the general trend in markets around the world, continued to decline amid weaker oil prices and slowing demand. The energy sector dropped 1.4% as U.S. crude prices were down 3.6% a barrel, while Brent crude lost 3.4%. Cenovus Energy also reported its third straight quarterly loss, despite just days ago they acquired rival Husky Energy Inc.

Alamos Gold Inc, was the largest percentage gainer on the TSX, jumping 11.9% after third-quarter earnings beat estimates. However, a different gold company, OceanaGold Corp, led the losers, falling 8.1% after reporting a higher quarterly loss.

This has been a rough week for the TSX, and global markets in general. In the previous session, the Candian index fell by 2.7% due to jitters from the surge in COVID infections ravaging Canada.

Leading ETF provider Invesco Ltd. (NYSE: IVZ) announced the launch of the brand new Invesco S&P/TSX Composite ESG Index ETF (ticker symbol: ESGC) by Invesco Canada Ltd. The ESGC ETF, which will be listed on the TSX, will be the very first Canadian-listed ETF to track the S&P/TSX Composite ESG Index.

What is the S&P/TSX Composite ESG Index? This index uses the S&P and Dow Jones’ Environmental, Social, and Governance (ESG) criteria to select companies from the benchmark Canadian S&P/TSX Composite Index. This unique criterion, for the first time, gives Canadian investors access to notable Canadian companies that strong ESG fundamentals while still offering a risk/return profile similar to the benchmark Index.

ESG investing is also known as “sustainable investing.” This is a style of investing that looks beyond clean balance sheets and returns. Rather ESG investing looks to invest in companies that offer positive returns combined with a positive long-term impact on society, the environment, and the performance of the business. By measuring the sustainability and social impact of an investment in a company, many investors believe that these criteria help to better determine future financial performance. The ESGC ETF specifically screens companies to exclude those involved in tobacco, weapons, thermal coal, and with a disqualifying UN Global Compact score.

Invesco has been one of the first companies to focus on investing in the ESG space, having launched cleantech ETFs in 2005.  This will be the ninth ESG focused ETF that Invesco has launched in the Americas. Over half of these ETFs have been around for more than 15 years as well. In the EMEA region, Invesco has eight ESG ETFs that screen companies across three different global regions.

The ESCG ETF has been trading on the TSX since October 8th.

On the surface, both the American S&P 500 and Candian TSX, have recovered nicely since the March 2020 crash. While the TSX has made up nearly all of their losses from the crash, the S&P is now up nearly 5% since the start of the year.

However, if investors look more deeply, the recovery since the crash looks more like a narrow ETF, than a broad index. The S&P 500 and the TSX are supposed to be broad indices representing companies in the US and Canada. However, look closely at the indices’ returns and where they are coming from. The results of how narrow they are, are staggering. 

If you simply remove the Top-5 best performing names from the S&P-Apple, Amazon, Microsoft, Nvidia, and Facebook- and the Top-5 best performing names from the TSX-Shopify, Barrick, CN Rail, CP Rail, and Wheaton-suddenly, the 2020 recovery doesn’t look so impressive. In fact, the performance of the indices turns substantially worse.

The S&P 500 becomes marginally negative for the year, while the TSX drops deep into correction territory. In fact, Shopify alone is responsible for over 4.5% of the TSX’s returns this year.

Why does this matter? It supports the notion that the market’s recovery from COVID only reflects certain tech stocks that have been able to adapt to the “new normal.” Shopify and Amazon, for example, have largely benefitted from more people staying at home, and the increased need for e-commerce.

While stocks like Shopify are up over 150% this year, look at non-tech Canadian stocks. Financials such as the Royal Bank of Canada (RY) and Toronto-Dominion (TD) are down 13.12% and 22.29% respectively, and energy stocks such as Enbridge (ENB) and TC Energy (TRP) are down 31.35% and 22.35% respectively.

While the recoveries of both the S&P and TSX certainly are impressive after that dreadful March 2020, not everything is always as it seems. Be mindful that the stock market does not always reflect reality and the broader economy.

Without a pandemic vaccine in hand, companies, airports, schools, and hospitals are turning to temperature scanning technology, such as infrared thermal cameras, in an effort to help reduce the spread of the virus. “Thermal imaging and sensing technology will certainly be among the lines of defense against the virus, according to market research firm Yole …Without a pandemic vaccine in hand, companies, airports, schools, and hospitals are turning to temperature scanning technology, such as infrared thermal cameras, in an effort to help reduce the spread of the virus. “Thermal imaging and sensing technology will certainly be among the lines of defense against the virus, according to market research firm Yole …

Analysts remain bullish on gold. UBS for example believes gold could run even further and remain high “for longer than expected” on global uncertainty, as noted by CNBC. The analyst added the firm raised its forecast for gold next year from $1,850 to $2,100.  “An environment of negative real interest rates and global uncertainties, such …Analysts remain bullish on gold. UBS for example believes gold could run even further and remain high “for longer than expected” on global uncertainty, as noted by CNBC. The analyst added the firm raised its forecast for gold next year from $1,850 to $2,100.  “An environment of negative real interest rates and global uncertainties, such …

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