Toronto Stock Market Up After Worst Day of 2019 but Issues with Trade and Oil Remain

TSX Suffers Worst Day of 2019, Crude Oil Has Worst Week

The Toronto Stock Exchange (TSX) has been one of the best performing exchanges in 2019, but it recently went through a terrible week. On Thursday, May 23, the TSX suffered its worst day of 2019 as investors dumped technology stocks as well as stocks in cyclical sectors as fears of a full out trade war between the U.S. and China would dampen global economic growth.

Weak oil prices have also been weighing heavily on the TSX. The exchange closed last Thursday down 162.74 points, or 1%, to 16,164.61—its worst day since the December sell-off reached its zenith on Christmas Eve. The July contract for crude was down 6.8%, representing the worst week of the year.

Overall, seven of the 11 major sectors took a hit. Healthcare was down 3% while industrials, technology, and finances were down around 1%.

It wasn’t all bad news. The June contract for gold was up US$11.20 at US$1285.40 an ounce. And utilities and real estate, both defensive plays, saw gains, as investors took shelter in safe-haven assets.

Trading President Trump?

The TSX, U.S. markets, and exchanges around the world have been fluctuating sharply on an almost-daily basis. Why? Investors are glued to every little thing President Donald Trump tweets or says. This can make investing in this kind of market even more unpredictable than normal.

On Friday, May 24, the day after the TSX experienced its worst day of the year, the price of oil and the broader index rebounded after President Trump suggested there could be a quick end to the trade dispute with China. President Trump also hinted that Huawei Technologies could be part of the agreement.

The TSX advance was fuelled by gains in eight of the 11 major sectors: the biggest gainers were consumer staples, telecommunications, and utilities. Not surprisingly, the short-term optimism pulled June gold contract down $1.80 to $1,283.60.

The markets were up on Friday despite a raft of underwhelming U.S. economic data coming out. U.S. durable goods fell more than expected in April and U.S. manufacturing output fell to a nine-year low.

What this suggests is that President Trump’s tweets hold more sway than official economic data. And this has a material impact on the Canadian markets.

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A trade war is already having an impact on the global economy. But so too is anything President Trump says; even if it’s just a fleeting thought. This whipsaw action on Wall Street and Bay Street is almost unprecedented. While it can be difficult to invest with any certainty and profit in this kind of environment, the trading experts at Learn-To-Trade.com know that a trade war and President Trump’s tweets have opened up a window of opportunity.

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