MARKET OUTLOOK FOR SIA CHARTS
Year in Review
As 2013 was winding down we wrote about an ascent to normalcy in financial markets for 2014. The first three quarters of the year may have struck that cord, but things got a little dicey in the fourth. With respect to normalcy the United States completed the unwinding of their quantitative easing program, saw a steady decrease in unemployment rates, and posted a strong string of economic data that has brought the S&P500 Index to record levels. The Canadian stock market rode the wave of strong economic data and offered investors steady returns over the same period.
Then it all changed.
Slowing growth in China and Europe, record U.S. oil production, and a refusal to cut oil production at OPEC’s most recent meeting (see our December 2014 note: OPEC Maintains Oil Production) has pushed the price of light crude from $107 to a dismal $55 today. The dip in oil prices negatively impacted (obviously) oil and gas stocks as investors sold off holdings in the sector. The S&P/TSX Index erased nearly all of its yearly gains in a matter of months, but appears on the rebound this week as investors begin to dip their toes back in the oil pond.
For 2015 we remain confident the market will reward prudent investors. Companies directly impacted by low oil prices may feel short-term pain, but there is a bright side. In the United States approximately 70% of gross domestic product (GDP) is made up of consumer spending. When prices at the pump and utility bills are lower, consumers have more left over for discretionary spending. Couple the extra pocket money with expectations that interest rates will remain low for a ‘considerable period’ and it appears expansive monetary policy will continue to provide a tailwind. Did we mention the U.S. is our neighbor to the south and strong growth is likely to have spillover effects? Let us put the oil price woes behind us, focus on the opportunities created, and look forward to a joyous 2015.
Happy Holidays from our team at Morrison & Partners.
This newsletter was prepared solely by Bruce Morrison who is a registered representative of HollisWealth™ (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The view and opinions, including any recommendations, expressed in newsletter are those of Bruce Morrison only and not those of HollisWealth. TM Trademark of The Bank of Nova Scotia, used under license. Morrison & Partners Wealth Strategies is a personal trade name of Bruce Morrison.