Despite Market Volatility, the Path is Clearly Up

January 22, 2015

2014—It was the best of times, it was the worst of times and the end result was somewhere in between. The fourth quarter was marked by a significant oil price sell–off of nearly 50% from the peak in June of this year. Oil price volatility reverberated through our clients’ portfolios during the quarter, when much of the downside in the price of oil was realized. Although shares of oil companies recovered before year-end, the commodity price has not and remains near its 5-year low.


The S&P/TSX Composite Index traded in a wide range in 2014. After reaching a high of 15,625 in August, the Canadian benchmark plunged over 12% peak-to-trough before recovering in the final two weeks of the year. Despite the volatility, the S&P/TSX Composite Total Return Index put up another solid year in 2014, up 10.6%, despite a -1.5% return in the fourth quarter. The S&P 500 Total Return Index continued its recent string of outperformance, returning 13.7% in 2014, which equates to a 24.3% return in Canadian dollars. To put these outsized returns in context, the table below shows recent and longer-term returns for Canadian and US equities. The US market has done well in the last 5 years, but did not do well in the previous 5 years. In fact, over the past 10 years, the markets were even. This highlights the importance of staying the course and not buying into the market at peak enthusiasm, especially if that involves switching out of an undervalued market or asset class to do so. It is also important to focus on the sustainability of the individual companies in the portfolio, realizing that the headline risks of the market don’t apply to every individual company in the same way, if at all.Q4-2014 Quarterly Review Chart

Read full Q4-2014 Quarterly Review