MARKetS REPORT Q4 2019

“A new broom sweeps clean, but an old broom knows all the corners”

-        English Proverb

Dear friends,

Welcome to a new year and a new decade. In this letter, I would like to provide you with a brief overview of some key investment market developments over the past quarter and for 2019 as a whole, as well as some insight into the factors that may affect markets in the coming months. The year 2020 will mark my 26th year in the financial industry.  And this broom has seen a lot of dirt, especially in the corners.

Overall, global capital markets exhibited remarkable resilience in 2019, rebounding from a severe decline that occurred in late 2018. Despite starting the year on a tentative note, they ultimately shrugged off a stream of negative headlines and uneasy sentiment to stage a robust recovery, with the fourth quarter capping off a year of broad-based gains across most equity and income asset classes.

Supported by low interest rates, slow global economic progress and healthy corporate fundamentals, global equity markets advanced in the fourth quarter and registered solid results for 2019, with many finishing the year just off their all-time highs. The MSCI World Index rose 6.5% in Canadian dollar terms during the last three months of 2019, bringing its gain for the year to 21.9%. And despite ongoing trade uncertainty and the developing impeachment drama, the S&P 500 Index, a broad measure of the U.S. equity market, was up 6.8% for the quarter and finished 2019 with an increase of 24.8%, including dividends.  All broad sectors in the S&P 500 were positive, led by Information Technology, Financials, Communication Services and Industrials.

Canadian equities also advanced in 2019, with supportive business conditions and strong commodity prices boosting results for most sectors. Gold moved up 18.3% to $1517.27 US$/oz and oil prices increased as well, WTI crude oil contracts ended 2019 at $61.06 US$/bbl.  The benchmark S&P/TSX Composite Index climbed 3.2% in the fourth quarter, capping off an impressive 22.9% gain for the year. The only sector with negative performance in Canada in 2019 was the Health Care sector, riddled with falling cannabis stocks.  Overseas, markets showed a similar trajectory, with European developed market equities advancing amid an environment of easy monetary policy and Brexit uncertainty, and many markets in Asia posting positive results for the fourth quarter and the year as well.

After moving to raise interest rates to a more “neutral” level from their record lows in 2018, the U.S. Federal Reserve reacted to weaker global economic growth and tepid inflation in 2019 by easing monetary policy. The U.S. central bank made three separate 0.25% cuts to its target rate through the course of the year, while many other international peers also lowered rates based on global economic concerns. The Bank of Canada, however, charted a divergent course, keeping its policy interest rate steady at 1.75% throughout the year. In this environment, 10-year U.S. and Canada government bond yields drifted higher in the fourth quarter, rebounding from their yearly lows in the third quarter. The FTSE TMX Universe Bond Index, which broadly reflects results for the Canadian government and corporate bond market, registered slightly negative returns for the fourth quarter but a gain of 6.9% for the year. 

What’s the outlook for 2020?

Looking forward, many economists and market watchers forecast slow but positive global economic growth over the coming months, while interest rates are also expected to remain low by historical standards. While this type of environment tends to be generally supportive for businesses and asset markets, experienced investors are also preparing for a lower-return environment consistent with a mature business cycle, as well as periods of increased volatility. With valuations for many assets near record highs, a well-diversified, professionally managed investment portfolio can help to maximize returns and mitigate risks as they occur.

RRSP and TFSA

An RRSP (Registered Retirement Savings Plan) is a tax-advantaged savings plan that can help you grow your retirement income. Any investment income earned in an RRSP is tax-deferred, until withdrawn. While RRSPs are meant to save for retirement, you also have the option of using a portion of the funds in the plan to purchase your first home (Home Buyers Plan) or pay for your education (Lifelong Learning Plan). The deadline to contribute to your RRSP for tax year 2019 is Monday March 2nd, 2020.  The whole team will be in the office until 8:00pm that Monday accepting cheques.  Or, you can plan ahead, call or email for an appointment and then come visit us before the deadline.

If you cannot contribute to your RRSP (perhaps you are past age 71 or have already contributed the maximum allowed) then you should certainly contribute to your Tax Free Savings Account (TFSA).  The maximum yearly amount is once again $6,000.  If you missed last year’s contribution, or if you have withdrawn money from your TFSA last year, then you can contribute even more to your TFSA.  Call or email my office and I can explain in detail what specific amounts you are allowed.  If you haven’t been to our new office yet then why not use a TFSA or RRSP contribution as a great excuse to drop in and check out our new digs.  The coffee pot is on, and there may even be a cookie available for you.

In closing, I would like to extend my sincere wishes for a happy new year to you and your family. I would also like to thank to you for your continued trust in me and for the opportunity to assist you in working toward your financial goals. Should you have any questions about your investments or the market outlook for the coming year, please remember that I or a member of my team is just a phone call away.

Sincerely,

Mark McConnell, BA (Economics), DipBIS

Senior Investment Advisor, Branch Manager

Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.

This publication contains the opinion of the writer.  The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. The information in this letter is derived from various sources, including CI Investments, Mackenzie Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). This material is provided for general information and is subject to change without notice. Although every effort has been made to compile this material from reliable sources; no warranty can be made as to its accuracy or completeness, and we assume no responsibility for any reliance upon it. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.