Second Quarter 2014 Review

Canadian Equity
Canadian stocks were up 6.4% over the quarter, and continued to outperform the broader global market through 2014. In a reversal of recent trends, health care was the worst performing sector, declining 6.6%, largely driven by the performance of Valeant Pharmaceuticals. All other sectors posted positive gains with the energy and industrials sectors leading the way at 10.5% and 9.4% respectively. Many energy companies benefited from the increasing price of oil in light of uncertainty in the Middle East. The materials sector kept pace with the Index. Small-cap stocks outperformed their large-cap counterparts over the quarter.

Global Equity
Global stocks were positive again, with the MSCI World Index returning 1.4% in Canadian dollars. Japanese equities rebounded from last quarter with a 3.0% gain while European returns were flat. The U.S. market was also positive, slightly outperforming the global market. The Canadian dollar appreciated during the quarter, hurting the returns of foreign assets when measured in Canadian dollars. Emerging markets were able to outperform the broader developed markets as a whole.

Fixed Income
The FTSE TMX Canada (formerly DEX) Universe Bond Index posted a 2.0% return for the quarter as yields decreased across the Canadian curve during the quarter. The provincials and municipals sectors each outperformed the broader market, increasing 2.8% and 2.7% respectively. Corporate and federal bonds both underperformed the broader market, returning 1.8% and 1.5% respectively. 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%.