Year-End Review 2015

As the clock ticks from one year to the next, we assess the volatility of global markets and the challenging circumstances of the past year. While the world’s economy is improving slowly, there are still issues with both bond and equity markets. The sharp sell-offs in China, lowering commodity values and the weakness of Canada’s dollar all play a role in depressing those markets.

The past year saw conditions of limited stability, which resulted in an average performance for the equity markets. The MSCI All Country World Index performed poorly, netting a 4.3% loss in the past year. While the S&P 500 Index did not feature positive gains, the loss was only limited to 0.7%. This highlights the United States economy’s continued improvement, which is due in large part to their diversity. The housing market continues to evolve, while unemployment figures are declining and confidence in businesses is returning. Right at the end of the year, America’s Federal Reserve indicated its intention to raise interest rates by 0.25% in the short term. This shows how much the country’s economy has evolved since the disaster of 2008.

In contrast, the commodity heavy S&P/TSX Composite Index in Canada is not showing similar signs of process. It continues to decline due to a heavy reliance on oil, metal and other commodity prices. This puts it behind the markets of most developed nations. Looking at oil prices, which are now close to $35 per barrel, highlights why the benchmark index is set to finish at a loss of 11.1%. Despite those figures, the government bond yields in Canada are performing respectably, along with the FTSE TMX Canada Universe Bond Index. This index measures the value of government and corporate bonds, and posted a gain of 3.5% for 2015.

This economic picture is both encouraging and a reason for caution. The global economy and markets are in constant flux. Both China and the United States are showing signs of expansion, while inflation is not a concern anywhere in the world. The Federal Reserve is also playing its part in ensuring investors are satisfied. Central banks in other parts of the world, such as China, Canada and many European nations, are also taking similar steps to lower interest rates.

There is no doubt that volatility in the stock market spooks investors, but they must remain aware of the overall picture. Equity markets will always rise and fall in the short-term, but their long-term health is not in question. Portfolios with plenty of diversity and a tolerance for moderate risk will smooth out in the long-run, especially if you build wealth patiently.

The performance of specific portfolios hinges on a number of factors, such as asset allocation and diversity. Every portfolio manager must make strategic decisions to benefit their clients, which have an impact on yearly figures.

If you take three things away from this letter, they are:

  1. Patience
  2. Calmness during periods of volatility
  3. Importance of diversifying

If you have any questions, concerns or thoughts on your portfolio, or investing in general, do not hesitate to contact me at my office number (613-592-2422) or via email at justin@panoramawealth.ca.

Have a safe and wonderful year!

Justin Claros, B.A.A.,
Investment Fund Advisor

block

 

 

About The Author

Leave a Reply

Your email address will not be published.