First Quarter 2016 Commentary

April 21, 2016

Capital markets were a bit unsettling in the first quarter of 2016 as stocks exhibited heightened volatility and selling off through the first two months of the year 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. During the First Quarter of 2016, the S&P/TSX Composite was up 4.5%, the MSCI World indexes was down -1.8% and the FTSE CDN Bond Universe was up 1.4%. In Canadian dollar total return terms, the S&P/TSX Composite was up 4.5%, the MSCI World indexes was down -6.3% and the FTSE CDN Bond Universe was up 1.4%.

Canada’s S&P/TSX Composite Index offered a bright spot among global markets during the quarter as the index gained on a strong crude oil price rally. The Bank of Canada once again left interest rates unchanged as the economy defied expectations to post a 0.6% increase in GDP for the month of January, its best month since mid-2013. The gain was led by strength in non-energy related sectors such as manufacturing, which have benefitted from a weaker loonie and a strong U.S. economy.

In the U.S., all eyes were on the Federal Reserve. After announcing its first interest rate increase in nearly a decade back in December, the Fed reiterated a cautious note and left rates unchanged, citing risks related to slowing global economic growth. The move by the Fed was widely expected despite signs of economic expansion moving forward including strong employment numbers, moderate inflation and a rebounding housing sector.

Overseas, several central banks introduced measures to stimulate their economies. The Bank of Japan announced negative interest rate, China implemented new policies to encourage lending, and the European Central Bank announced additions to its monetary easing efforts including cutting key rates and a €20 billion increase to monthly asset purchases. Despite the central banks best efforts, stock markets in Europe, Japan and China were mostly down for the quarter. Latin American stock markets, who were among the worst performers in 2015, rallied from their lows to post strong increases in Q1.

Global capital markets have exhibited a higher level of volatility over the past several quarters which may continue over 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 and time the markets during turbulent periods, history tells us that keeping an eye on the long-term horizon and staying true to a sound, diversified financial strategy is the best course of action. We continue to favour equities over bonds, however, we have reduced our Global equities bias over Canada to neutral weighting.

As always, should you have any questions about your investment portfolio, the markets or wealth management issues in general, my team and I are here to help. Please call my office at 416-246-0888 or email me at

“Champions are made from something they have deep inside them – a desire, a dream, a vision.” – Muhammad Ali


Valerio Cattelan, BSc, MBA, CIM®
Portfolio Manager
Director, Private Client Group

* Market Statistics and returns sourced from Market Snapshot completed by Private Client Research, HollisWealth.  This article was prepared solely by Valerio Cattelan who is a registered representative of HollisWealth® (a division of iA Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The views and opinions, including any recommendations, expressed in this article are those of Valerio Cattelan only and not those of HollisWealth.

Cattelan Private Wealth Counsel.