Market Update 1st Quarter 2016

Capital markets were unsettled in the first quarter of 2016, with stocks exhibiting heightened volatility and selling off through January and February before recovering in March. While markets were initially affected by the familiar themes of slow global growth, low commodity prices and uncertainty over monetary policy, investors appeared to gain confidence as the quarter progressed. Here at home, Canada’s S&P/TSX Composite Index offered a bright spot among global markets. The index gained 4.5% including dividends, as oil rallied strongly into the end of the quarter after dipping to multi-year lows in mid-February. The S&P 500 Index in the U.S. posted a modest gain of 1.4%. However this translated into a loss of 5.0% in Canadian dollars (which is the currency in which your statements report) as the loonie appreciated 6.7% in value relative to its U.S. counterpart. The MSCI World Index finished the quarter nearly flat with a return of -0.2% in U.S. dollars (but again, a loss [of -6.5%] when expressed in Canadian dollars). Results of the various local markets varied widely. Stock markets in Europe, Japan and China, for example, were mostly down for the quarter despite central banks’ efforts to boost liquidity and keep borrowing rates low, while others including Taiwan and South Korea made small gains. Markets in Latin American countries such as Brazil, among the worst performers in 2015, rallied from their lows to post strong increases. Bond markets, meanwhile, finished the first quarter with mainly positive results. In the U.S., economic data remained encouraging, with strong employment numbers, moderate inflation and a rebounding housing sector. However, after announcing its first interest rate increase in nearly a decade in December, the U.S. Federal Reserve sounded a cautious note and left rates unchanged in the first quarter, citing risks including sluggish global growth. Overseas, several other central banks introduced measures to stimulate their economies during the quarter, including negative interest rates by the Bank of Japan, key rate cuts by the European Central Bank and policies to encourage lending in China. These actions, along with muted inflation, helped to drive yields for longer-maturity government bonds lower. The Bank of Canada also left rates unchanged in the first quarter as the Canadian economy defied expectations to post a broad-based 0.6% GDP increase in January, its best month since mid-2013. The FTSE TMX Canada Universe Bond Index, a measure of Canadian government and investment-grade corporate bonds, returned 1.4% for the three-month period. Overall, global capital markets have exhibited a higher level of volatility over the past several quarters, and this may continue to be the case during 2016. Nevertheless, conditions that support the expansion of the global economy and individual businesses, including low inflation and low interest rates, persist. Although it may be tempting to try to limit losses by exiting the markets during more turbulent periods, history also tells us that keeping an eye on the long-term horizon and staying true to a sound, diversified financial plan is the best course of action. In closing, we would like to remind you that we are always here to help. Should you have any questions, please don’t hesitate to call. Peter & Andrew


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