Northern Trust Pension Universe Data

Canadian Pension Plan Returns Concluded the First Quarter With an Upbeat Tone Buoyed by Rising Stock Markets

Canadian Pension Plans finished the first three months of 2024 on a positive note, generating a median return of 2.5%, according to the Northern Trust Canada Universe.

The first quarter of 2024 was dominated by macro-economic data flows, with particular focus on inflation and its salient components. Despite some inflation targets coming into vision, most central banks maintained their current policy stance while adapting their monetary message to share more narrative around the potential, or further required conditions, for interest rate cuts as they carve out a path to normalization.

While investors await the ultimate pivot in monetary policy, the final stretch of the inflation journey comes with volatility as witnessed following the release of some stronger economic data points in the first quarter. Investor optimism surrounding the potential for interest rate cuts this year coupled with economic resiliency pushed equity markets higher for the period, with the U.S. market generating an impressive double-digit return. Conversely, the bond market reacted less favorably to some of the mixed data, eroding gains from the prior quarter and receding into negative territory for the period as yields marched higher.

“The transition through interest rate cycles within the economic ecosystem quite often can be a challenging path, necessitating the need for quality and granularity of data, comprehensive integrated tools and sound investment strategies, as pension managers navigate this journey,” said Katie Pries, President and CEO of Northern Trust Canada. “The strength of Canadian pension returns this quarter validated the pension toolkit, a bespoke asset utilized by plan sponsors, is channeling pension plans on a course to sustainable financial health.”

The Northern Trust Canada universe tracks the performance of Canadian institutional defined benefit plans that subscribe to performance measurement services as part of Northern Trust’s asset service offerings.

The first quarter of 2024 witnessed some bumpy days in the financial markets driven by uncertainty surrounding the timing of monetary easing. Despite the strength of inflation figures during the period, market participants took comfort in its long-term direction. As investor optimism gained momentum and recession fears faded, global equity markets advanced higher by quarter end. Notwithstanding the favorable move in stocks, some of the stronger than expected economic data pushed the yield curve higher, creating more friction for bondholders, resulting in negative returns for the Canadian bond universe for the period.