Services d’Investissement Férique


Market Review


First quarter, 2013


Fixed income


Bonds did well during the first quarter, boosted in large part by loose monetary policies at most of the world’s major central banks. The Federal Reserve is in the midst of an $85 billion per month bond-buying program which continues to keep down yields and has narrowed spreads in corporate issues.


Europe recently avoided a major debacle, by forcing a haircut on large depositors in insolvent Cypriot banks thus forestalling a possible exit by the island economy from the euro zone. However investors in European economies remained calm, despite the implications of this precedent on holders of Greek, Spanish, Portuguese and other lower graded securities. Japan, following the election of a new government and the appointment of a new central bank governor, is pursuing its loose money policy with increased vigour. The world’s second largest economy, which is in a prolonged battle to stem deflation, tried hard to change expectations by announcing a 2% inflation target, which it has vowed to meet using all means available.


Canadian Treasuries throughout most of the yield curve did well, due to continued demand by international investors seeking to diversify their portfolios. Two, five and ten year rates ended the quarter at 1.31%[1], 1.52% and 1.79%, down by 14.1, 10.5 and 4.1 basis points respectively.  The lone exception was 30-years bonds, whose yields rose by 13.1 basis points, to 2.49%.





Canadian markets

Canadian stocks, like those in most major advanced economies, performed well during the first quarter, rising by 2.1%[2].  One major exception was resource issues which continued to be hurt by weak global demand, particularly from emerging economies such as China. Canada’s gold producers have been facing additional productivity-related challenges, at a time of weakening precious metal prices. Canadian oil producers are also having a rough go at it, due to weaker global demand for their “dirty” oil, coupled with continuing challenges getting product to market. Stakeholders continue to place hopes in the Keystone pipeline, which they hope will be approved by US regulatory officials later this year.


US markets

US stocks performed exceptionally well during Q1, with the S&P 500 rising 9.53%[3], despite weak consumer demand and employment data.  Businesses, flush with cash due to the low borrowing costs, are doing especially well, with profits now at near record levels relative to GDP. The country’s fiscal cliff tax increase compromise reached at the start of the year, coupled with large, across-the-board spending cuts, appear to be giving market players a certain degree of confidence. Part of the reason is that although growth is expected to be slow throughout the rest of 2013, a significant part of S&P 500 companies’ earnings come from outside of the country.


Foreign markets 

Foreign markets followed North American stocks up during Q1. Japanese companies did particularly well due to the devaluing yen, which is improving their competitive positions in global markets. European businesses also did well, in large part on the “no news is good news” theorem. Stocks on the old continent had been beaten down so badly, due to serial crises in peripheral nations such as Greece, Ireland, Italy, Spain and Portugal, that mere small events, such as the recent restructuring in Cyprus appear to be small beer, and in fact served to boost investor confidence.







[1] Data taken from Addenda as at April 1, 2013 (March 31rst data were not available). Stock earnings are in local currency terms and do no include dividends.

[2] Ibid

[3] Ibid


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