Equity markets in North America continued to recover in 2010. The Canadian equity market delivered a total return of 17.6%, driven largely by mining stocks in both the base metals and gold sectors. On a Canadian dollar basis, the S&P 500 in the United States also performed well, returning 9.3% for the year.
Equity markets performed less well outside of North America over the same time period. Both the U.K. and German markets, in Canadian dollar terms, were up only 2%, while international (EAFE) markets did slightly better, at 2.7% on the same basis. European markets clearly were negatively impacted by the fiscal crises’ affecting their weaker members with the overall MSCI European index down 4%. Returns from developing equity markets were mixed, with Hong Kong and Shanghai declining 0.5% and 15%, respectively, while Korea and Singapore posted gains of 19% and 14%, reflecting their industrial- and export-oriented markets.
We remain optimistic regarding both the North American economy and its stock markets. Leading indicators across the United States point to improving economic activity. Unfortunately, unemployment remains stubbornly high at around 10%. However, it is important to note that this is a lagging, not a leading, indicator. As the economy continues to pick up steam, the employment scenario will improve.
As we have written before, we continue to be wary of the relatively small and unbalanced nature of the Canadian equity market. While gold has certainly been very strong with the uncertainty facing the U.S. dollar, this trend may have peaked. As the U.S. economy recovers, and its currency regains credibility, the appetite for gold (and gold stocks) will abate. We believe the fundamentals of base metals (particularly coal, iron ore and copper), are more attractive as they benefit from economic expansion in Asia and elsewhere.
We expect equity markets to continue to perform positively in 2011, albeit in a more balanced manner. We have positioned our portfolios to reflect this outlook, and will continue to fine tune them in the New Year.
January 2011
Equity markets in North America continued to recover in 2010. The Canadian equity market delivered a total return of 17.6%, driven largely by mining stocks in both the base metals and gold sectors. On a Canadian dollar basis, the S&P 500 in the United States also performed well, returning 9.3% for the year.
Equity markets performed less well outside of North America over the same time period. Both the U.K. and German markets, in Canadian dollar terms, were up only 2%, while international (EAFE) markets did slightly better, at 2.7% on the same basis. European markets clearly were negatively impacted by the fiscal crises’ affecting their weaker members with the overall MSCI European index down 4%. Returns from developing equity markets were mixed, with Hong Kong and Shanghai declining 0.5% and 15%, respectively, while Korea and Singapore posted gains of 19% and 14%, reflecting their industrial- and export-oriented markets.
We remain optimistic regarding both the North American economy and its stock markets. Leading indicators across the United States point to improving economic activity. Unfortunately, unemployment remains stubbornly high at around 10%. However, it is important to note that this is a lagging, not a leading, indicator. As the economy continues to pick up steam, the employment scenario will improve.
As we have written before, we continue to be wary of the relatively small and unbalanced nature of the Canadian equity market. While gold has certainly been very strong with the uncertainty facing the U.S. dollar, this trend may have peaked. As the U.S. economy recovers, and its currency regains credibility, the appetite for gold (and gold stocks) will abate. We believe the fundamentals of base metals (particularly coal, iron ore and copper), are more attractive as they benefit from economic expansion in Asia and elsewhere.
We expect equity markets to continue to perform positively in 2011, albeit in a more balanced manner. We have positioned our portfolios to reflect this outlook, and will continue to fine tune them in the New Year.