July 2014 Commentary

Lulled to sleep by consecutive record closing highs at the beginning of July, investors were abruptly awakened by the end of month haircut to risky assets. While the S&P 500 suffered its first monthly decline since January, Canada’s TSX eked out a 1.42% total return, thanks to the 4.5% advance in bank stocks which contributed a 1.46% total return to the index. Given better than expected fiscal Q3 results and growing discomfort with dividend growth at the telecom stocks and the valuations of utility and mid-stream companies, the reallocation of investor dollars to Canada’s most heavily weighted sector propelled our market to its positive performance in July. In contrast, high yield bonds sold off hard, as did the small cap bellwether Russell 2000 index, down 6.1%...