Commentaries

The MSCI World Index barely escaped a loss in May with a return +0.17%, a move its EAFE component did not pull off, closing the month down 0.37%. Interestingly, sector returns were very similar between the two markets. The key difference was the greater weight of Financials in EAFE (25.6%) versus the World (21.1%) Index. All markets were led by the same three sectors in May; Energy, Materials, and Industrials outperformed significantly while Financial Services trailed. The Information Technology sector performed well as investors started to take notice of strong cash generation and the possibility of a renewed investment cycle.

March was a month of positive returns in a volatile and difficult quarter. The MSCI World Index returned +3.76% for the month despite a material loss for the quarter (-5.45%). The MSCI EAFE Index performed similarly (+3.66% /-5.29%). Sector performance revealed no specific trend with the best performing sector being defensive in nature (Consumer Staples: +7.71%) while the second best is cyclical (Industrials: +5.44%). Utilities (+4.86%) and Financial Services (+4.36%) outperformed the broad market while Materials (+1.18%) was the weakest performer for the month. Two sectors were down double digits during the first quarter. Surprisingly enough, they were Telecommunications (-11.88%) and Information Technology (-11.20%), both of which experienced significant losses despite being out of the headlines.

The MSCI World Index continued to lose ground in February, registering a loss of 3.42% in Canadian currency while the MSCI EAFE Index ended the period down 1.47%. Only two of ten sectors ended the month in positive territory, Energy (+4.64%) and Materials (+3.97%), as demand from emerging economies remained healthy. Telecommunications and Financial Services were the worst performing sectors (-8.43% and -8.02% respectively) of the period, but Information Technology remains the laggard year to date with a return of -14.57%.

As market volatility takes centre stage in the news, even the most savvy investors may feel anxious and concerned about their investments. While investors are aware that markets experience ups and downs, dealing with erratic markets and economic uncertainty can be an emotionally draining experience. Now is a good time to re-visit some of the basic principles of successful long-term investing, and feel confident about the prospects of your investments.

Recently, a combination of events including the subprime meltdown and massive consumer debt in the U.S., China’s rapidly growing economy, and a global trade imbalance have caused investors to become anxious about the markets.

The year 2008 began as its predecessor had ended: on a down note. In Canadian currency, the MSCI World Index registered a loss of 5.65%. Its EAFE component did worse once again with a 7.28% pullback. Energy and Technology were the worst performing sectors (-9.74% and -9.96% respectively) in a market storm that pulled all sectors down into negative territory. Health Care suffered the least damage with losses within the 2.5% range.

December proved to be a difficult month for equity investors globally. The MSCI World Index was down 2.54% for the month while its EAFE component did worse with a 3.49% pullback. Financials caused damage in every part of the world as the process of recognizing structured credit losses related to the troubled U.S. real estate unfolds. The Financial sector’s loss amounted to 5.44%, finishing last for the month and the year (-22.23%).

In November, global equity market returns were slightly positive for Canadian investors. The MSCI World Index appreciated 0.94% for the month while its EAFE component improved 1.78%. At a time when headlines point to troubles at major global financial institutions and the U.S. economic slowdown, investors demonstrated a willingness to pay for safety. . . .

Global equity market returns were negative to Canadian dollar based investors in October as our currency appreciated in excess of 4% against its U.S. counterpart and by more than 2.5% against the euro. The MSCI World Index dropped 1.49% for the month while its EAFE component was down 0.66%. As a point of comparison, a US dollar based investors’ October return was 3.09% for the MSCI World Index (15.17% year to date).

Global equity market returns were negative in September. The MSCI World Index dropped 1.60% (in CAD$) for the month and 4.38% for the quarter, while the EAFE Index was down 1.04% and 4.55% for the month and quarter, respectively. Sector returns continued to demonstrate wide dispersion. The Materials sector was strong with a return of 4.02%, while Consumer Discretionary (-4.14%), Health Care (-3.02%), and Financials (-2.61%) all lagged significantly.

Financial markets experienced significant turmoil in August. The upheaval originated in the debt markets, but increased volatility quickly became evident among global stock exchanges. Yet, investors returning from a month-long vacation could, upon examining monthly return data, assume August had been a somewhat normal month. The MSCI World Index was down 1.00 % while its EAFE component retreated 2.47 %. Sector returns varied broadly, with Utilities (+1.74 %) performing best, as they typically do in such times of market concern, while Materials (-2.90 %) fared the worst due to investor concerns over a potential global economic slowdown.

Investors ended the month of July with a global reassessment of risk. Equity markets remained in negative territory during the month as fear of financial contagion resulting from increasing difficulties within the U.S. sub-prime mortgage market preoccupied credit market participants. The MSCI World Index lost 1.85%, and its EAFE component was down slightly less, at 1.10%. The U.S. market fared worse as it was at the center of credit market and housing trend controversies; the S&P 500 Index dropped 2.97% for the month.

Fundamental economic developments in the form of higher-than-expected economic growth and a renewed focus on investment risk shook markets during the second quarter. The MSCI World Index closed the period down 1.79% (-1.27% in June) while its EAFE component registered a loss of 1.89% (-0.38% in June).

Global equity market returns were again impacted by the Canadian dollar’s strong appreciation during the month of May. Despite positive local currency returns, the MSCI World Index return, in Canadian dollars, was -0.55% for the month

Global equity markets performed strongly during the month of April. Yet for Canadian investors, these gains proved elusive as the strong appreciation of the Canadian currency negated more than 90% of foreign market returns.

The 2007 Budget, delivered by Conservative Finance Minister Jim Flaherty, outlined a wide array of rebates and spending to appeal to a broad range of Canadians.

World equity markets continued to perform strongly in November as the MSCI World Index advanced 4.4% while its EAFE component rose 5.0%. Year to date as at November 30, 2006, the World Index return slightly exceeds 15% while the MSCI EAFE return is at 19.8%.