Fourth Quarter 2014 Review

Canadian Equity
For the second consecutive quarter, the energy and materials sectors were a significant drag on performance as Canadian stocks declined by 1.5%. Falling oil prices was a major theme and hurt the stock price of oil and gas producers. It was not all bad, however, as the consumer staples, information technology and health care sectors each exceeded 15% in gains. Small cap stocks significantly underperformed large cap stocks as a result of the market’s significant exposure to resource-based companies.

Global Equity
Global stocks continued with their positive momentum as the MSCI World Index increased by 4.8% in Canadian dollars. US stocks were boosted by strong corporate earnings and an encouraging economic backdrop including solid GDP growth and employment figures. The S&P 500 Index increased by 8.6% in Canadian dollars while international stocks remained flat. Concerns over global economic data had investors flocking to US assets causing the US dollar to appreciate in value. Emerging markets lagged the rest of the world with Greece and Russia each experiencing significant declines.

Fixed Income
The FTSE TMX Canada Universe Bond Index posted a 2.7% return for the quarter. Bond yields continued to decrease across the yield curve, especially at the long end. The provincials and municipals sectors outperformed the broader market with gains of 3.9% and 3.4%, respectively. Corporate and federal bonds both underperformed the broader market, returning 1.9% and 2.3%, respectively. The Bank of Canada maintained its overnight rate at 1.0%, while the U.S. Federal Reserve left the Fed Funds Rate target unchanged at 0-0.25%.