Fellow readers – Happy 2018!
Corporate earnings, equity markets, and job growth all moved up in 2017 and in addition to having a good year, the last quarter of 2017 was one of our strongest on record.
The S&P 500 (the broader US market) finished the year with a 19.42% return but this was somewhat muted for Canadian investors as the 6% US Dollar decline reduced US returns at home, resulting in a net 11.86% return. Despite the currency hit, the net results in the US were still twice as good as those in the Canadian market, as the TSX was up a modest 6.03%. Many of the fixed income markets didn’t fare well, as low yields in a rising rate environment continues to be a challenge for this space. The iShares Canadian Universe Bond ETF, a broad measure of the Canadian Fixed income market, finished up just 1.02% in 2017. (Source: SIA Charts).
The widely held investment program known as the Willoughby Investment Pool (WIP) finished the year with an 8.64% return (F-series). As a reminder, this is a balanced investment program that includes a Canadian stock strategy, a US stock strategy, 5 externally managed domestic and international positions, as well as a fixed income component.
Our US strategy led the way this year and we significantly outperformed the overall market. The technology picks in the portfolio had a big impact with the likes of Micron, Applied Materials, and Facebook rising 76%, 50%, and 44% respectively. Online vehicle marketing company, Copart also had a solid year with a 46% gain.
Despite the headwinds in the fixed income market, Jennifer Snyder, Harbourfront’s fixed income specialist in our Toronto office, continues to make great strides in the sector through cherry picking and active bond trading.
Currency was our biggest challenge in 2017 as we had a 10+% move in the CAD from May to September (11% top to bottom), which negatively impacted performance during the summer months. An 11% rise in the CAD takes 11% performance away from our US holdings but it also takes a lot out of various Canadian stocks if they are listed on both US and Canadian exchanges. We managed the environment well, both on the equity and fixed income side and as mentioned above, we ended the year with an 8.64% return.
The bulls seem to continue to roar into 2018 but we’ll likely see some volatility along the way due to a number factors: rising rates in Canada and the US, political tensions in North Korea, and potential changes to NAFTA.
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Daniel Popescu CFP, CIM, FMA, FCSI
President & CEO
MNP Tower, 3100-1021 West Hastings St.
Vancouver, BC V6E 0C3
T: 604-558-6830/1(877) 588-6822
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“I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by Harbourfront Wealth Management Inc.”
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