Canadian defined benefit plans posted a median return of 2.5% for the second quarter, according to data from the Northern Trust Canada Universe.
Despite an equities sell-off in May, driven by worries over trade talks between the U.S. and China and weaker global growth, Canadian plans recorded a second consecutive quarter of positive performance.
Trade and global growth concerns contributed to equity volatility in major developed markets, and the U.S. Federal Reserve signaled the possibility of cutting interest rates after refraining from a rate cut at its June meeting. Canada's unemployment rate edged up slightly to 5.5% in June from 5.4% in May, its lowest level in 43 years.
"In the midst of uncertainty surrounding trade policies coupled with a mixed economic climate, Canadian pension plans continue to generate positive investment returns in the second quarter of 2019," said Arti Sharma, president and CEO of Northern Trust Canada in a news release. "Year-to-date, the median return is positioned at 9.9% vs. 2.9% the same time last year."
Canadian equities as measured by the S&P/TSX Composite index rose 2.6% in the second quarter. Seven of the index's 11 sectors achieved positive returns with information technology stocks leading the gains. Health care posted the weakest results as stocks in cannabis companies dropped after posting strong returns in the first quarter.
The MSCI EAFE index, which measures the performance of international developed markets, returned 1.7% in CAD in the second quarter. The ongoing trade and slower global growth showed the vulnerability of export-oriented economies such as Japan and Europe.
Escalating trade tensions between the U.S. and China caused emerging market stocks to lag against their developed market counterparts. The MSCI Emerging Market index posted a return of -1.5% in CAD for the quarter. Eight of the 11 sectors within the index posted negative returns.
The Bank of Canada kept its overnight rate target at 1.75% through the second quarter of 2019. The BoC lowered the GDP growth forecast for 2019 to 1.2% from 1.7% amid domestic challenges and a global slowdown.
