Fourth Quarter 2016 Commentary

January 18, 2017

If the last two weeks are any indication of how the year will shape up, then 2017 will be a much better year (from an economic perspective) than 2016, as data continues to support stronger expectations for earnings growth and a stable and growing global economy.

2016 was a year of surprises. The S&P/TSX Composite Index lead developed markets with an astonishing total return of 21.1%, fueled by a rebound in oil prices from its low in February. The advance marked a reversal from its worst calendar year since the 2008 Financial Crisis – having slipped -8.3% in 2015.[i]

The election of Donald J. Trump in November saw the S&P500 cling to the biggest post-election rally since JFK. The S&P 500 closed at an all-time high a mere 12 days after Trump’s victory on enthusiasm towards the Republican’s stimulus economic policies.

On the other hand, fixed income markets had a more difficult year as monetary policies continued to diverge across the globe. The Bank of Japan cut rates further into negative territory, issuing the first negative yield bond in its history. In contrast, the U.S. Federal Reserve moved interest rates in December for the second time since 2006. The decision by the Federal Reserve to increase rates along with the pro-growth policies of the Republicans drove Treasury bond yields sharply higher in the last two months of the year.

Although strong economies do not necessarily translate into strong market returns, economic data can provide insight on earnings growth and what valuations are reasonable. As such, we are entering 2017 with more confidence towards equity markets as recessionary risks over the coming one to two years remain muted and fundamentals look set to undergo a late-stage improvement.

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

We wish you all the best in 2017.


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


[i] Market statistics and returns sourced from Morningstar 2016 Q4 Canadian Market Review.


Cattelan Private Wealth Counsel.