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Summary
- Stocks rose in Canada for the 8th straight month in February as the S&P/TSX Composite Index generated a monthly total return of 4.44%
- The Canadian bond market moved up marginally last month, generating a return of 0.23% as longer-term bond yields fell slightly despite the fact that short-term interest rates moved higher.
- Commodity markets were sharply higher in February as the turmoil in the Gulf Region and Northern Africa pushed oil prices higher. The CRB Commodity Index was up 5.94%.
- The Economic data continued to improve last month, particularly in the consumer sector. The Canadian Dollar had one of its stronger moves in recent years, gaining 2.7% versus the US dollar during February.
- In terms of stock sectors, the heavyweight Energy and Financial sectors lead the way in February with gains of 6.6% and 6.0%, respectively. The Mines and Metals, Utility, Telecom and Consumer sectors all lost ground.
- Our Stock Market Outlook is still bullish over the medium-term as economic growth is recovering, profits continue to improve, interest rates remain low and stock valuations are reasonable. Stocks have had strong gains since the market lows last August and are always at risk of a short-term correction. The current turmoil in Northern Africa and the Middle East seems to be providing some of that correction risk as cyclical stocks have dropped over the past few weeks. But we view that only as a short-term risk. The overall fundamental outlook argues for higher stock prices over the next few years. Corporate profits are within 10% of their prior peak and there’s no reason to think that stock prices won’t do the same.