BMO Nesbitt Burns
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Third Quarter 2014
North American stock markets delivered mixed returns in the third quarter of 2014. While the S&P/TSX Index and the S&P 500 Index reached all-time highs during the quarter, both indexes declined in September. Markets were influenced by improving U.S. economic data on one hand, and by concerns about slower growth in Europe and China on the other. Central bank announcements and geopolitical developments also played a role. Sector leadership was mixed with both cyclicals and defensives among the strongest and weakest performing sectors in the quarter. Health Care and Information Technology were among the leading sectors while Utilities, Energy, and Materials were among the laggards.
The S&P/TSX Index posted a total return of -0.6% in the third quarter. Seven of the ten sectors had positive returns. Consumer Staples was the best performing sector by far with a return of 12.5%. It was followed by Industrials and Health Care with returns of 9.4% and 7.4%, respectively. Information Technology was next with a return of 3.9%. Telecommunication Services, Energy, and Materials all underperformed the index and were the weakest performers this quarter. While Telecommunication Services lagged the index by just 0.2%, Energy and Materials, with returns of -6.6% and -10.1%, respectively, were outliers and negatively impacted the performance of the overall index. In Materials, the gold and silver groups were among the biggest detractors from performance.
The S&P 500 Index outperformed the S&P/TSX Index in the third quarter posting a total return of 6.2% in CAD terms and 1.1% in USD terms. Q3 was the first quarter in 2014 in which the S&P 500 Index beat its Canadian counterpart. Seven of the ten sectors delivered positive returns with five sectors beating the index. Health Care and Information Technology were the best performing sectors returning 5.5% and 4.8%, respectively. They were followed by Telecommunications Services with a return of 3.1%. The bottom four sectors were Materials, Industrials, Utilities, and Energy. Utilities and Energy, with returns of -4.0% and -8.6%, respectively, noticeably lagged the index as well as the other sectors.
Canadian fixed income markets, as represented by the FTSE TMX Canada Universe Bond Index, returned 1.1% in the third quarter. Long-term bonds outperformed short-term bonds. Provincial bonds outperformed Federal bonds which, in turn, outperformed Corporate bonds. Provincial bonds beat the index while both Federal and Corporate bonds lagged the index.
As of September 30, 2014. Source: Bloomberg, PC-Bond
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