Fourth Quarter 2015 Review

Canadian Equities

Canadian equities were down again this quarter, losing 1.4%. The same concerns over energy prices that plagued the market in Q3 continued in Q4. Canada’s economic growth prospects continue to suffer due to low oil prices, but the manufacturing sector increased exports over the quarter, aided by a strong U.S. economy and a weaker Canadian dollar. The health care sector saw the biggest fall during the quarter, down 36.9%. This is largely due to Valeant Pharmaceutical’s decline of 41.0% amid accusations of fraud.

Global Equities

World markets, represented by the MSCI World Index (C$), were up 9.4% at the end of the quarter. The S&P 500 (C$) performed well, up 10.6% over the quarter. Health care and technology companies, particularly Amazon, led the way in the U.S. The MSCI EAFE Index (C$) was up 8.5% for the quarter. On the back of strong economic data, the Federal Reserve increased interest rates in December for the first time since 2006. The European Central Bank and the Bank of Japan remain committed to their quantitative easing programs with the hopes of propping up the economy. The MSCI Emerging Markets ($C) Index was up 4.4% at the end of the quarter.

Fixed Income

Bond yields across the U.S. increased in the fourth quarter, in response to the Federal Reserve’s rate increase. The Bank of Canada left its overnight rate unchanged at 0.50% as they believe that the risks to the domestic economy were stable. However, they have left the door open to lower rates further in response to a slower economy. The FTSE TMX Canada Universe Bond Index was up 1.0% for the quarter. Corporate bonds under-performed as spreads in the corporate sector continued to widen. Provincials and municipals outperformed the broader markets while federal bonds underperformed.