Equity markets were mixed in October as Canadian stocks advanced while most global indices declined, with a late-month selloff in AI-related technology shares overshadowing an otherwise resilient market. Worries over AI infrastructure spending culminated in a sharp selloff on October 30 after Amazon's aggressive spending plans and a weak outlook from Intel, while the Middle East conflict pushed energy prices and inflation higher. September inflation readings rose to 3.1% and 3.7% year-over-year for Canada and the US, respectively. Central bank policies diverged during the month: the Bank of Canada raised its policy rate by 0.25% to 2.50%, its first hike since 2023, while the US Federal Reserve held rates steady at 3.75%-4.00%.
The S&P/TSX Composite Index gained 1.2% month-over-month (m/m), supported by energy shares as oil prices climbed. The S&P 500 Index declined 2.6% in CAD terms (vs. -0.9% m/m in USD) as AI-linked technology names sold off, with the Nasdaq posting its worst month since March 2025. The Russell 2000 Index, a measure of US small-capitalization stocks, declined 1.1% in CAD terms (+0.6% in USD), while international markets, represented by the MSCI EAFE and MSCI EM indices, returned -2.4% (CAD) and -9.6% (CAD), respectively. Emerging markets lagged most as the AI chip selloff hit South Korea and Taiwan.
In the fixed income market, yields fell sharply on a flight to safety during the technology selloff, with the largest gains at the long end. The FTSE Canada Long Term Bond Index gained 2.8% m/m, compared with gains of 0.7% for short-term bonds and 1.6% for medium-term bonds. The FTSE Canada Universe Bond Index gained 1.5%. The Bloomberg Global Aggregate Bond Index gained 1.4% in USD but declined 0.3% in CAD terms.
Commodities recorded mixed results. Crude oil prices surged on escalating Middle East tensions, including a tanker attack in the Strait of Hormuz, while gold declined. WTI crude oil increased by about 15.2% to settle at roughly US$104 per barrel, its highest level since April, while gold dropped by about 5%. From a currency perspective, the Canadian dollar appreciated by 1.7% against the U.S. dollar during the month. This was a headwind to unhedged U.S. dollar exposures for Canadian investors.
Against this backdrop, the Balanced Fund returned 0.2% for the month. The Equity Fund returned 0.2%, while the Bond Fund returned 0.9%. The Money Market Fund returned 0.2%.
Disclaimer
The information contained in this market summary is provided for general informational purposes only and is intended to help CSS Pension Plan members understand recent market conditions and the performance of CSS funds. It does not constitute investment advice, and should not be relied upon as the basis for any investment decision.
As a defined contribution plan member, the value of your account and the appropriateness of any particular investment option will depend on your individual financial situation, retirement goals, time horizon, and risk tolerance. Past fund performance is not indicative of future results.
Nothing in this summary should be construed as a recommendation to buy, sell, or hold any investment, or to change your current contribution or investment directions.
If you have questions about your personal account or would like to discuss your individual circumstances, we encourage you to contact a CSS Retirement and Pension Advisor. Our advisors are available to provide guidance tailored to your specific situation.