Market Commentary – Q3 2017

What an interesting quarter it’s been! The Canadian dollar rallied more than a dime from its lows in May around $0.725 US all the way up to $0.829 at the beginning of September. Not to be outdone, oil climbed about $10 from lows in mid-June up to a high of $52.86 in late September. The world has been on edge with the increasing intensity of the back and forth volley of insults and threats between Trump and Kim Jong-un; this took gold for a ride up 13.2% from its early July low of $1204.00 US. Thankfully they have both calmed down in recent weeks.

Canada – The S&P/TSX Composite resumed its uptrend this quarter rising 3.7% with value and large cap stocks leading the way, up 5.1% and 4.0%, respectively; growth stocks barely budged, rising just 0.1%. The year to date performance of the Composite is up 4.5%.

United States – US stocks managed to post a small gain, advancing 0.7% for the quarter and 6.3% year to date. Growth stocks lead the way, advancing 2.0% while value stocks fell 0.6%.

International & Emerging Markets – International and emerging markets continued to advance again this quarter and are the best performing equity sub-asset classes so far this year. International equities advance 1.6% this quarter and are up 12.4% year to date, while the emerging markets are this year’s star, up 4.0% this quarter and 19.5% year to date.  

Economic News – According to the IMF, everything is coming up roses for Canada and they just recently revised their growth forecast upward again this year. Back in July, they estimated the economy will grow 2.5% this year and this was revised to 3.0% on Oct 10th. This puts Canada at the forefront of economic growth expectations in the G7 for 2017 and the prediction for 2018 is still very optimistic at 2.1%. It’s not just the IMF that is very optimistic, the OECD also agrees – Canada will lead the G7 in growth.

Could NAFTA be the wrench that might derail the growth forecast for 2018? Six months’ notice is required to be given before a party may withdraw, however, while there is no debate that a President has the authority to give notice, there is debate on whether he also has the power to actually tear up the agreement. What makes this unclear is that Congress enacted legislation to implement the trade deal in 1994 and only Congress can repeal statutes.

A positive for the US economy could be the proposed tax reform. At first glance, this has the potential to be a significant positive event for the American economy and the stock market, however, given the failure of repealing Obamacare and the disarray in the Republican party, this could just be a pipe dream.