An Event Filled Quarter

July 15, 2016

Oil prices and the Canadian equity market continued their respective ascents in Q2, up 26.1% and 5.1% respectively. For oil, this was the strongest quarter since 2009, as fundamental supply/demand dynamics continued to improve. The S&P 500 gained ground as well, up 2.5% in local currency, however the Canadian dollar appreciated up 0.6% against the US dollar, taking away from returns on foreign equities for Canadian investors.


Q2 was eventful from both a macroeconomic and geopolitical perspective. The quarter began with a stunning special meeting of major oil producers in Doha, Qatar. Saudi Arabia unexpectedly changed course at the 11th hour, thwarting a major production freeze agreement with Russia and OPEC producers (excluding Iran) that had been aiding the oil price recovery through the end of March. In May, the US Federal Reserve abruptly adjusted guidance toward raising interest rates, sending interest rate traders into a frenzy of adjusting positions. The so-called “Fed Futures” went from a near zero probability of an interest rate increase before September to a greater than 50% chance in just days. Later in the month, a weak US jobs report sent interest rate expectations tumbling back down, however uncertainty remained. In Canada, tragic wildfires severely curtailed Canadian oil production and economic growth in May. June brought another OPEC meeting that was much more constructive than the “Doha debacle,” a decision not to raise interest rates by the US Federal Reserve and finally, the highly anticipated UK referendum on the status of their membership within the European Union.

Read full Q3-2016 Quarterly Review.

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