First Quarter 2013 Review
The Canadian equity market increased 3.3% during the first quarter as intervention by global central banks continued to stimulate equity markets. Gains were led by the health care, telecom services and consumer related sectors. The materials and utilities sectors were the worst performers as Canadian mining stocks are experiencing the longest slump in 20 years. Large-cap stocks continued to outperform their small-cap counterparts.
Global equity markets were also positive and outpaced the Canadian market with the MSCI World Index returning 10.1% in Canadian dollar terms. News of the European Central Bank’s commitment to unlimited bond buying spurred on the rally as did the Bank of Japan’s intent to effectively double the money supply by 2015. Emerging markets held their value but significantly underperformed developed markets. U.S. equities increased 12.9% due to better than expected income and consumption data. The weakening of the Canadian dollar versus the U.S. dollar added to U.S. market performance.
Fixed income posted positive returns with the DEX Universe Bond Index increasing by 0.7%. The federal and provincial sectors underperformed the overall Index, with the majority of underperformance in the long-end of the maturity spectrum. The corporate sector outperformed the DEX Universe Bond Index. The Canadian yield curve steepened with the most significant movements in the short end of the curve as the 1, 2 and 3 year federal bond yields decreased by 6, 15 and 18 basis points 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%.