First Quarter 2011 Review

Continuing the trend of the second half of 2010, the Canadian equity market posted strong first quarter results with the S&P/TSX Composite Index up 5.6% over the period. Gains were led by the health care sector (which represents only 1% of the overall Index) and the energy sector as crude oil prices increased in the face of rising political tension within the Middle-East and Northern Africa. Materials was a poor performing sector despite the rise in commodity prices globally. Small cap stocks lagged their large cap counter parts.

Global equity markets posted positive results during the quarter but trailed the Canadian equity market. U.S. equities were up 3.5% in Canadian Dollars ($C). Gains were led by the energy sector as fuel prices continued to increase. The depreciation of the U.S. dollar versus the Canadian dollar negatively impacted foreign holdings.

The European region returned 4.3% ($C) in spite of concerns of potential economic bail-outs for peripheral European countries. Expectedly, the Japanese equity market declined 6.9% as the nation tries to rebuild following the tragic natural disasters and nuclear crises, which interrupted manufacturing supply chains globally. Emerging markets trailed developed markets due to worries regarding rising inflation.

Fixed income returns were negative once again as the DEX Universe Bond Index declined 0.3%. Corporate issues provided positive results while government bonds were in negative territory. Short-term bonds significantly outpaced longer term maturities. The Bank of Canada maintained the overnight rate at 1% while the U.S. Federal Reserve maintained their target of 0 - 0.25%.