July 13th, 2012

Strategy Review

After a strong start to the first quarter of 2012, in the second quarter investors were once again reminded of the macro risk factors facing the global economy and the European sovereign-debt crisis in particular.April returns were more or less flat in both Canada and the U.S. equity markets as Q1 earnings reports were generally better than consensus expectations.Actual Q1 earnings reports showed +7.3% year over year growth compared to negative expected growth for consensus earnings estimates. However, May was dominated by a series of unfavourable economic reports that supported the old adage: “sell in May and go away”. Between weaker than expected data on European private sector business activity, Chinese industrial production and U.S. jobs, both the U.S and Canadian stock markets lost over 6% in May alone. This culminated with the S&P 500 testing the lows of its 200 day moving average on June 4th but quickly snapping back