Stocks and bonds gave plans a welcome boost despite volatility in third quarter
Canada’s defined benefit pension plans faced multi-faceted volatility in the third quarter of 2024 but ended the period with improved financial health.
The quarter included elections in the UK and France, mixed economic data, challenges to the strength of technology stocks, and central banks taking a less restrictive stance as inflation eased – not least the welcomed jumbo cut by the Fed that gave a boost to equities and bonds.
The latest reading of the Northern Trust Canada Universe, tracking the performance of institutional pension plans that subscribe to the firm’s measurement services, reported that the median Canadian pension plan returned 4.8% for the quarter and 8.4% for the year-to-date (Sept. 30).
“As major central banks around the globe seek a path to neutrality, Canadian pension plans remained in solid financial form supported by healthy solvency ratios,” said Katie Pries, president and CEO of Northern Trust Canada. “Throughout the interest rate journey, plan sponsors exercised vigilance through the lens of balancing risks and adopting sound strategies that position plan investments for a successful and sustainable retirement future.”
Among the key stats for the third quarter:
- Canadian Equities, as measured by the S&P/TSX Composite Index, advanced 10.5% for the quarter. All sectors within the index posted positive performance, led by Real Estate followed by Financials, Utilities and Health Care sectors.
- U.S. Equities, as measured by the S&P 500 Index, returned 4.5% in CAD for the quarter, with 10 of the 11 sectors generating positive returns, led by the Utilities sector and followed by Real Estate. The Energy sector was the only segment posting negative returns for the period.
- International developed markets, as measured by the MSCI EAFE Index, recorded 6.0% in CAD for the quarter. Most sectors advanced during the period with Real Estate being the top performer and the Energy sector posting the weakest results.
- The MSCI Emerging Markets Index generated 7.5% in CAD for the quarter. Most sectors posted positive returns led by the Consumer Discretionary and Health Care sectors, while Information Technology and Energy sectors declined over the period.
As well as the Fed cutting rates, the Bank of Canada also mulled the economic data that highlighted some softening of the Canadian labour market, CPI data, and other signs that further interest rate cuts will likely be required.
