First Quarter 2015 Review

Canadian Equity
The Canadian stock market, represented by the S&P/TSX Composite, was up 2.6% in the first quarter of 2015. The best performing sector by a large margin was the health care sector. The Canadian health care sector is small and dominated by Valeant Pharmaceuticals, which rose by 50% following its purchase of US-based Salix Pharmaceuticals. The acquisition makes Valeant the fourth largest Canadian company by market capitalization. The energy sector performed the worst, losing 1.1%, as the price of oil continued its decline. Small-cap stocks underperformed large cap stocks for the third consecutive quarter.

Global Equity
Global equities delivered a strong performance for the quarter, in large part due to currency gains from a weakening Canadian dollar. The MSCI World Index returned 12.0%. Both developed and emerging markets were positive. Central banks around the world, with the exception of the U.S. Federal Reserve, pursued quantitative easing policies by cutting their short term interest rates. The MSCI EAFE Index return of 14.8% outpaced the S&P 500 Index return of 10.4%. The MSCI Emerging Markets Index return was 11.8%. On a sector basis, the health care and consumer discretionary sectors were strongest while the utilities and energy sectors delivered slightly negative returns.

Fixed Income
Similar to other central banks, the Bank of Canada instituted a surprise rate cut in January. The overnight rate was reduced by 25 basis points to 0.75%, the lowest it has been in over four years. The FTSE TMX Canada Universe Bond Index returned 4.2% for the quarter. The surprise cut reduced short-term rates more than their long-term counterparts, resulting in a steepening of the yield curve. Corporate and federal government bonds underperformed the broader market while provincials and municipals outperformed.