2017 in Review

2017 was a year of high returns and low volatility. The Canadian and U.S.markets reached record highs, and stocks solidly outperformed bonds as rebounding global growth, low rates and rising sentiment helped produce above-average gains across global equity markets. Some pockets of euphoriashowed up as Bitcoin and marijuana stocks grabbed headlines and big gains.
Quarter in Review chart

Source: Morningstar Direct, 12/31/2017. All returns in local currency and total return. Representative indexes are: Real Estate: S&P Canada REIT Index, High Yield Bonds: Barclays High Yield Canadians Index, Canada Large-cap Stocks: S&P/TSX Composite Index, U.S. Small- and Mid-cap Stocks: Russell 2500 Index, International Bonds: Barclays Global Aggregate Bond Index , Canada Bonds: FTSE TMX Canada Universe Bond Index, U.S. Large-cap Stocks: S&P 500 Index, Emerging Market Stocks: MSCI EM Index, Overseas Large-cap Stocks: MSCI EAFE Index. Past performance is not a guarantee of how the market will perform in the future. Indexes are unmanaged and are not available for direct investment. All returns expressed in local currency and include reinvested dividends.

Historically calm stock markets – The Canadian market drifted lower by 6% mid-year, but had just six days with a move greater than 1%. The S&P 500 went the entire year without a 3% decline as the Volatility Index (VIX) reached an all-time low.

Domestic stocks were good, not great – The 9% return from the TSX was solid, but appears somewhat disappointing when compared to international gains. Although the domestic market spent the first half of 2017 treading water, strong Canadian GDP growth supported earnings and showed up in the leadership of the consumer discretionary, financial services and industrial sectors. Overall market gains were limited, as the heavyweight energy sector fell 7% on the year despite a 12% rise in oil prices.

International markets surged higher – Overseas stock markets produced strong gains on the year, driven by a healthy rebound in economic growth. European economies were among the brightest spot, with Eurozone GDP expanding at the fastest pace in a decade. China’s economy posted its frst uptick since 2010, leading emerging-market equities to a 30% gain. U.S. equities also delivered their second-best gain since 2010, as economic activity steadily improved and enthusiasm around tax reform spurred a 22% return for the S&P 500.

Important Information:

Past performance of the markets is not a guarantee of what will happen in the future. Equity investments carry risk, including the loss of principal. There are special risks inherent in international investing, including currency, withholding taxes and high levels of taxation, political, social and economic risks.

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