Second Quarter 2013 Review

Canadian Equity
Canadian stocks were down 4.1% over the quarter, erasing year-to-date gains. The decline came in June due to weak performances from the materials, telecom services, technology and utilities sectors. Utilities, an interest-sensitive sector, was hurt as a result of rising bond yields, while telecom was pressured by the threat of increased competition from U.S. providers. Energy, the second largest sector also lost ground. Gains were led by the health care and consumer related sectors. Financials, the largest sector, outperformed the broader Index. Large-cap stocks continued to outperform their small-cap counterparts.

Global Equity
Global stocks were positive with MSCI World Index returning 4.7% in Canadian dollars ($C). Japan led global markets as accommodative monetary policy continued to fuel the rally in its equity markets. Emerging markets lost 4.4%, significantly underperforming developed markets. U.S. equities increased 6.5% as a result of improving employment statistics. The weakening of the Canadian dollar versus the U.S. dollar added to U.S. market performance.

Fixed Income
Fixed income posted negative returns with the DEX Universe Bond Index declining 2.4%. The corporate sector outperformed the broader Index while government bonds underperformed. Short-term bonds outperformed longer term issues as yields rose. 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%.