Q3-2015 Equity Commentary – A Quarter to Forget

October 27, 2015

The third quarter of 2015 was one investors WILL WANT to quickly erase from their memories. Broad-based volatility was evident on both sides of the border as the S&P/TSX Composite Total Return Index dropped 7.9% while the S&P 500 Total Return Index dropped 6.4% in US dollars. Canadian sector leadership changed course during Q3 as Healthcare dropped 15.6%, owing to a $100 drop in Valeant Pharmaceuticals at the end of September, while the Materials and Energy sectors seem to have reached capitulation level.

ECONOMIC FUNDAMENTALS CONTINUE TO IMPROVE

While it appears stock market volatility is likely to continue in Q4, globally, economic fundamentals continue to improve. US GDP growth has accelerated towards an annualized 4% pace, while Europe has resumed growth as well. China fears appear overblown as policy makers still have ample room to stimulate the Chinese economy. Strengthening developed world demand and lower prices for raw materials are also beneficial. At home, much has been made of the weakness in the Canadian economy. The Bank of Canada has cut interest rates back to all-time lows and the Canadian dollar is down ~19% year-over-year. US economic growth is likely to spill into Canada, especially with a ~$0.75 exchange rate, and more of our economy still benefits from the lower price of oil.

Read full Q3-2015 Quarterly Review