Fourth Quarter 2011 Review

Canadian Equity
The Canadian economy regained some of the momentum it lost earlier in the year and reported positive GDP. The Canadian equity market as measured by the S&P/TSX Composite Index grew 3.6% over the quarter but finished the year down 8.7%. Gains were led by the industrials sector followed by the energy sector which posted positive results following three quarters of significant underperformance. Information technology and materials were the only sectors posting negative results over the quarter, and were consequently the worst performers over the year. The Canadian dollar appreciated against the U.S. dollar and the Euro over the quarter.
Foreign Equity
Global equity markets were also positive with the MSCI World Index returning 5.3% over the quarter, driven by the strong performance of the United States. A flight to quality elevated the demand for the U.S. securities, helping the S&P 500 Index to return 9.5% (CAD) over the quarter. The U.S. also witnessed positive but subdued growth in manufacturing and consumption, improving from depressed levels. Emerging markets continued to trail their developed counterparts, finishing the year down 16.1%.
Fixed Income

Fixed income posted positive returns with the DEX Universe Bond Index advancing 2.1% during the quarter as provincial and municipal bonds outperformed the broader Index while federal and corporate issues underperformed. Long-term bonds continued to significantly outpace shorter-term maturities, finishing the year up 18.1%. 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%.