January 1st, 2011

Strategy Review

The Trend is Your Friend…But for How Much Longer?

Equity markets picked up where they left off in December as major averages continued to power higher through the month of January. The S&P 500 climbed 2.3% in U.S. dollar terms last month and is up about 20% since January of 2010. The Canadian equity market had a more modest start to 2011, climbing “just” 0.8%, although the TSX is now up over 22% from last year. Gold certainly didn’t help the Canadian equity market as the price of bullion slid by just over 6% to US$1,333 per ounce on the back of a stronger U.S. dollar, and a fledgling view that stronger U.S. growth could mean less quantitative easing from the Federal Reserve (possible, but in our view not likely). The Canadian dollar fell slightly against the Greenback, dropping 0.3% last month, but continues to be among the very best performing global currencies relative to the U.S. dollar. The price of oil remained relatively flat, holding above the US$90 level on concerns recent tensions in Egypt could prove destabilizing in the Middle East and threaten the supply of oil out of the region.