Fourth Quarter 2013 Review

Canadian Equity
Canadian stocks were up 7.3% over the quarter, to finish the year with a 13.0% return. The materials sector, which lagged the S&P/TSX Composite throughout 2013, was the only sector to post a negative return during the quarter. Gains were led by the Industrials, health care, and financials sectors. Small-cap stocks slightly underperformed their large-cap counterparts over the quarter.

Global Equity
Global stocks were positive with the MSCI World Index returning 11.8% in Canadian dollars. Gains were led by U.S. stocks which finished the quarter strongly. Markets reacted positively to the Fed announcing their plans to scale back bond purchases. International equities returned 9.3% and were led by European stocks. The weakening of the Canadian dollar helped boost returns in foreign assets. The Canadian market finished the year significantly behind international equity markets and emerging markets continued to trail developed markets.

Fixed Income
The DEX Universe Bond Index returned 0.4% for the quarter but it wasn’t enough to get back into positive territory for the year. It was the first year the Index posted a negative return since 1999. The corporate and municipal sectors outperformed the broader Index at 0.9% and 0.6% respectively. Government bonds underperformed as provincial issues slightly lagged and federal bonds posted a slight negative return. 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%.