Monthly Review - November 2021
Comparison between XLP and S&P500, by Dounya Iddir
The consumer goods sector performed fairly well during the month of October, trending upward. The XLP, Consumer Staples Select Sector SPDR Fund, outperformed the S&P500 Index, made up of 500 publicly traded US companies, from the end of October to November 5th. As of that date, the S&P500 has passed the consumer staples sector and still outperforms it as of November 26, 2021, as seen in figure 1.
Figure 1 : Comparison of XLP and S&P500 for the month of November 2021
Alors que la bourse a connu un énorme choc ce vendredi 26 novembre 2021 en raison d’un nouveau variant assez perturbant de la COVID-19, de nombreuses entreprises ont connu une énorme baisse dans la valeur de leurs actions. Pour le secteur de la consommation de base, il est possible de constater que l’impact n’est pas aussi grand que dans les autres étant donné la consommation de ces biens même en cas de crise.
Figure 2 : Comparison of XLP and S&P500 from November 22nd to November 26th 2021
In Figure 2, we notice the S&P500’s passage from 0.41% to -0.87% at the market opening on November 26, 2021, the XLP only had a difference of -0.34%, passing from 0.14% to -0.20% on the same day. We therefore see a less disturbing drop in the consumer staples sector than in the US market index.
The price of oil drops, lowest price in 2021, par Daphné Binard
After two months of increases in the price of WTI (West Texas Intermediate : reference index for oil pricing), the price per barrel fell from $78.10 USD to $68.16 USD between the close of November 25 and 26, for a total decline of more than 20% since October.
Figure 3 : WTI Barrel Price Fluctuation
Investors are worried. Uncertainty about the impact of the new Omicron variant from South Africa is forcing oil companies to be cautious. They are anticipating a drop in demand for oil, which is causing demand for futures to fall. This variant is a concern, its spread is rapid and its resistance to vaccines is unknown. In response, several countries have already suspended flights from Southern Africa. Demand for oil has already started to drop.
In addition, pressure has been put on OPEC by the International Energy Agency and numerous countries to bring prices down to an affordable level and thus help consumers. The United States announced on November 23rd a surprising alliance with countries including China. This agreement implies that countries will draw on their own strategic oil reserves to increase supply and thus mechanically lower prices. Usually, strategic reserves are used in emergencies, as in 2011 when production in Libya was interrupted. This coalition is also a message to the cartel that they are not the only ones in the market and that they cannot restrict their production of black gold as they wish.
By Albert Obeid
A meteoric rise from Upgrade,
Upgrade, the fintech startup that turns credit card balances into instalment loans, has closed a fundraising round that values the company at $6.28 billion. The company raised $280 million in its Series F round led by new investors Coatue Management and DST Global, according to Upgrade CEO Renaud Laplanche. That’s an 83 percent jump from the previous round this year, which valued Upgrade at $3.43 billion.
Most of the increase is due to the San Francisco-based company’s strong revenue growth, which rose 70 percent between June and October, the two fundraising periods.
Latest news and analysis,
After plunging amid the coronavirus market crash, a sharp recession, and 10-year interest rates below 1%, JPMorgan Chase (JPM), Bank of America (BAC), and Wells Fargo (WFC) were boosted by the coronavirus vaccines and the prospect of more stimulus. Treasury yield spreads widened again, with the 10-year rate moving back above 1%. Investment bank activity has picked up, as investors look forward to the end of Covid restrictions and a full economic recovery later this year for banks like JPMorgan, Goldman Sachs (GS), Morgan Stanley (MS) and Citigroup (C).
By Khalil Abboud
OBE (Open Banking Environnement by Flinks),
A few days before the end of November, Flinks in collaboration with National Bank of Canada launches its OBE-Open Banking Environment which will allow the secure sharing of financial data from consumers of financial institutions to FinTechs, without screen scraping (a process that consists of sharing the username and password of the bank to the application so that the latter connects to the bank and copies the data displayed on the screen). More than 300 startups will be integrated to this platform only with their connections with BNC. This is a big step for Open Banking in Canada; according to Dominique Samson, COO of Flinks: “With the broad scope OBE has, it makes me very bullish for the future of open banking in Canada”.
Figure 4 : Comparison between the performance of the S&P Cryptocurrency Broad Digital Market Index and the performance of the S&P500
November has been a month of ups and downs for cryptocurrencies. The beginning of the month illustrated a bullish trend. However, from the second half of the month onward, a decline in the price of several crypto could be observed: Bitcoin -18%, Ethereum -14%. This is notable by the comparison of the returns of the S&P Cryptocurrency Broad Digital Market Index (USD) which fell by 8.19% to the S&P 500 which fell by only 0.23%.
El Salvador took advantage of this fall to buy 100 BTC as mentioned by Nayib Bukele, President of El Salvador, on his twitter. It should be remembered that El Salvador is the first country to have Bitcoin as its national currency. Last November 20th, President Bukele announced the creation of the first Bitcoin City, a city that will be financed entirely by bonds linked to virtual currencies.
By Neda Saiah
Billdr announced on November 16 that it had closed a new round of funding valued at C$4 million. This young Montreal company, launched in 2020, is now preparing to expand its North American influence by entering the United States market.
A brief description of the company,
The vision implemented by Billdr offers a support service to bridge the gap between homeowners and contractors. The aim of this online platform is to make renovations simpler and more efficient by establishing transparent relationships between stakeholders. The mission of Billdr’s renovation advisers is therefore to find certified contractors while exercising the function of the manager of your renovation projects.
An international funding round,
Led by the american venture capital fund, One Way Ventures, this round of financing has been successful thanks to many international investors. These include companies and funds from Quebec, the United States, France, and the United Kingdom.
United States: Shopify, Uber, Goodwater Capital, Moving Capital, Aleka Capital.
United Kingdom: Simple Capital
France: Kima Ventures
Quebec: asterX Capital
*Québecor’s new venture capital fund
Entry into the United States,
With just over twenty employees in their Montreal and Toronto office, the Montreal start-up has just opened its third office in Chicago. This new round of funding will be devoted to investments related to the development of their digital tools. With the renovation market totaling more than $ 300B in North America, Billdr is therefore considering an annual sales growth of 700% in 2021 thanks to this expansion.
By Myriem Merini
The Industrials sector consists primarily of capital goods, business services and transportation. The latter sector experienced a slight increase during the first half of November, based on the performance of the S&P 500/TSX Composite, which showed a return for industrial stocks of 1.3%. It, thus, underperformed the index, which posted a return of 3.5%. However, this disparity seems to be a one-time occurrence, since on an annual basis the return is rather similar.
Table 1 : Index S&P/TSX composed – Evolution of the prices (total return)
Figure 5 : Performance in november: XGI.TO and S&P/ TSX
By analyzing the chart comparing the iShares S&P Global Industrials Index ETF (CAD-Hedged) to the S&P/TSX Composite Index, we observe a rather similar evolution until recently where we note a considerable underperformance which can be explained by the fact that the industrial sector was more severely affected by the announcement of the new COVID-19 variant which caused the stock market to plunge into the red on Friday, November 26, 2021. It is also important to point out that in the context of a rebalancing process of the economy, growth is inhibited by the supply problems faced by industries. With delivery times getting longer and longer and demand continuing to grow, input prices have increased forcing factories to adjust by also raising their prices. The shortage of microprocessors has particularly affected the automotive sector, which has seen its production decrease by 15.9% compared to February 2020. According to Canada’s national bank, these production constraints are not expected to ease by the second half of 2022. However, the bank seems optimistic about the performance of the capital goods sector, which has historically done quite well in times of hyperinflation.
By Léo Lamy-Laliberté
A neutral November for the materials sector. The XMA.TO Index barely outperformed the growth of the S&P/TSX Composite Index (in red) yet finishing the month below the overall market index.
The basic materials sector surged nearly 8% in the first half of the month in response to the signing of the U.S. President’s US$1.2T bipartisan Infrastructure Bill aimed at stimulating the U.S. economy. This announcement suggests an increase in demand for industrial materials.
Figure 6 : Performance in november : XMA.TO and S&P/ TSX
However, prices fell rapidly in the second half of November and dropped below the overall S&P/TSX index to a value of 17.68 for the materials index (XMA.TO). Being highly sensitive to the overall economic health, the materials sector was affected by high inflation rates and lower demand from the Chinese market. The rise of the price of oil to US$82.30 per barrel at the end of the month also contributed to the decline of the index due to its negative impact on the chemical industry, the largest in the sector. The discovery of the Covid-19 variant Omicron added a final wind of uncertainty to the overall market to close the month with a sharp price drop. However, with the arrival of the virus and Biden’s decision to open federal oil reserves to lower the price of the barrel, there is a positive hint for the month of December.
By Ariane Beauregard
Consumer discretionary is in fact non-essential goods without being luxury goods, therefore goods that when revenue allows it, they are consumed. Thus, when economy is in a period of growth, the S&P/TSX Capped Consumer Discretionary Index (TTCD) is also growing. This index is often compared to the S&P/TSX Capped Consumer Staples Index (TTCS), which represents essential goods and fluctuates in cycle according to the evolution of economy. It is possible to see in the graph below that the two indexes follow each other closely, consumer discretionary being the highest.
Figure 7 : Comparison between the S&P/TSX (TTCD) and the S&P/TSX (TTCS)
The consumer discretionary index is composed of 13 stocks for a market capitalization value of 110.465B$. In the last month, the index has reached its minimal point on October 27th at a price of 251.76$. Its second bigger stock, Restaurant Brands International Inc (QSR), which represents 20.64% of the index, has released its financial results of the third quarter on October 25th. Indeed, its profits and revenues are decreasing, which created a loss of trust from investors, making the stock price decrease.
Figure 8 : Consumer Discretionary Index
By Olivier Kénol
November was not an easy month for the technology sector of the Canadian stock market. Indeed, XIT (iShares S&P/TSX Capped Information Technology Index ETF), tracking the returns of the biggest technology companies listed on the TSX, returned a negative 1.92% for the month of November while the Canadian market returned a positive 0.42%.
Figure 9 : Comparison between iShares S&P/TSX and S&P/TSX
Composed of a majority of ten stocks, XIT includes several niches in the technology sector. According to its market value, the exchange-traded fund is made up of three niches: Application Software (47.17%), Internet Services & Infrastructure (28.60%) and information technology consulting services (13.43%).
The negative performance of the fund is partly due to the performance of Lightspeed (down 42.53%). Lightspeed is a point-of-sale and e-commerce provider whose goal is to provide a platform on which retail and restaurant businesses can sell their product around the world. The decline in the stock’s value can be attributed to the company’s quarterly results and projections that did not satisfy the investors in addition to a report issued by Spruce Point Capital Management at the end of September accusing the company of misleading its shareholders.
By Marc-Hubert Acajou-Bathelmy
November was not a lucrative month for investors in the utilities sector. The iShares S&P/TSX Capped Utilities Index ETF (XUT.TO) underperformed the S&P/TSX Index by offering a negative return of 0.30% compared to the index which offered a return of 0.53%. On the eve of the last month of the year, the utilities sector offered a meager annual return of 5.76% to its investors. This represents a 21.12% difference from the S&P/TSX Index, which has offered a generous 26.88% return so far this year.
Figure 10 : November Performance: XUT.TO and S&P/TSX
On November 15th, Joe Biden, President of the United States, signed the $1 trillion infrastructure bill. The package will put $550 billion in new funds into transportation, broadband and utilities. While the primary purpose of this agreement is to serve the American people, this news greatly affects Canadian utilities companies as many of them operate on American soil. For example, the Canadian utility company Brookfield Renewable (BEP.TO) generates 40% of its cash flow in the U.S. and Fortis (FTS.TO) has 63% of its assets in the U.S. In short, this is bill is good news for Canadian utility companies who will see additional funding for future projects.
https://www.investors.com/. 2021. Banks And Financial Stocks: Latest News And Analysis. [online] Available at: <https://www.investors.com/news/banks-and-financial-stocks-news-and-analysis-bofa-wellsfargo-jpmorgan-goldmansachs/>
Son, H., 2021. Credit card start-up Upgrade jumps 83% in valuation in just four months to $6.28 billion. [online] https://www.cnbc.com/. Available at: <https://www.cnbc.com/2021/11/16/credit-cards-upgrade-jumps-83percent-in-valuation-to-6point28-billion-after-just-four-months.html>
Thibault, G. (2021, October 27). L’OPEN BANKING – Une décentralisation du monopole numérique financier. Retrieved from PolyFinances: https://polyfinances.ca/2021/10/27/l-open-banking/
Rolfe, K. (2021, November 24). TIRED OF WAITING, FLINKS LAUNCHES ITS OWN OPEN BANKING ENVIRONMENT WITH NATIONAL BANK. Récupéré sur betakit: https://betakit.com/tired-of-waiting-flinks-launches-its-own-open-banking-environment-with-national-bank/
Lynn, B. (2021, Novembre 24). El Salvador Aims to Build World’s First ‘Bitcoin City. Retrieved from Voa News: https://learningenglish.voanews.com/a/el-salvador-aims-to-build-world-s-first-bitcoin-city-/6324479.html
Billdr: Rénover Votre Maison en Toute Confiance
Kastner, D. (18 novembre 2021). Materials Sector Rating: Neutral. Schwab. https://www.schwab.com/resource-center/insights/content/materials-sector
The White House. (23 novembre 2021). President Biden Announces Release from the Strategic Petroleum Reserve As Part of Ongoing Efforts to Lower Prices and Address Lack of Supply Around the World. https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/23/president-biden-announces-release-from-the-strategic-petroleum-reserve-as-part-of-ongoing-efforts-to-lower-prices-and-address-lack-of-supply-around-the-world/
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