During the third quarter of 2008, the Canadian equity market slid into bear-market territory, declining 18.76%, while the S&P 500 fell 8.88%. Over the first half of the quarter, some of the negative forces faced by Canadian equities included weaker commodity prices, a stronger U.S. Dollar, slowing global growth (particularly in China), and a collapse in inflation expectations.
Over the past couple of months we have outlined some of the negative forces faced by Canadian equities, including weaker commodity prices, a stronger U.S. Dollar, slowing global growth (particularly in China), and a collapse in inflation expectations. These forces had sent the TSX index lower, but they paled in comparison to the havoc unleashed this past month as the financial system itself came under severe strain, resulting in the demise/forced sale of Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, AIG, Washington Mutual and Wachovia.
After July’s sharp selloff on the TSX Index, the month of August represented a return to somewhat more ‘normal’ trading conditions, although the resource sectors remain under pressure. This past month featured a growing consensus that the early July peak in commodities will represent a medium-term top in prices as investors grapple with clearly decelerating global growth and a resurgent U.S. Dollar. The long-running ‘long commodities, short USD’ trade appears to have finally lost momentum, and while the U.S.
The month of July was poor for the overall TSX Index, which was down 6.04%, but it was a nasty month for the materials and energy sub-indices, which were down 12.18% and 13.00% respectively. To put this performance into perspective, it has been close to three years since energy stocks have had such a weak month and it has been six years since materials have recorded such a decline.
With the bottom of the credit crisis panic in mid-March (the Bear Sterns rescue being the symbolic low-point), the second quarter of the year saw global capital markets return to operating in a fashion that we consider to be ‘nearly normal’. While the economic and corporate news remains mixed, markets are functional, assets are being revalued and, if necessary, disposed of (albeit typically at sharp discounts), and investor psychology has steadily improved.
After putting in two solid months of gains in April and May, global equity markets came apart in June as crude oil and a host of other commodities surged to new highs while financial institutions were once again under attack. The S&P 500 had its worst month since September 2002, declining 8.60%, while the NASDAQ fell an even greater 9.10%. The resource-insulated TSX managed to lose only 1.68% on the month, with double-digit gains in gold and fertilizers stocks offsetting sharp losses in virtually all other sectors.
FRANK MERSCH - Q3 2008 COMMENTARY
During the third quarter of 2008, the Canadian equity market slid into bear-market territory, declining 18.76%, while the S&P 500 fell 8.88%. Over the first half of the quarter, some of the negative forces faced by Canadian equities included weaker commodity prices, a stronger U.S. Dollar, slowing global growth (particularly in China), and a collapse in inflation expectations.
Front Street Canadian Hedge Monthly Commentary
Over the past couple of months we have outlined some of the negative forces faced by Canadian equities, including weaker commodity prices, a stronger U.S. Dollar, slowing global growth (particularly in China), and a collapse in inflation expectations. These forces had sent the TSX index lower, but they paled in comparison to the havoc unleashed this past month as the financial system itself came under severe strain, resulting in the demise/forced sale of Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, AIG, Washington Mutual and Wachovia.
Front Street Canadian Hedge - Monthly Commentary
After July’s sharp selloff on the TSX Index, the month of August represented a return to somewhat more ‘normal’ trading conditions, although the resource sectors remain under pressure. This past month featured a growing consensus that the early July peak in commodities will represent a medium-term top in prices as investors grapple with clearly decelerating global growth and a resurgent U.S. Dollar. The long-running ‘long commodities, short USD’ trade appears to have finally lost momentum, and while the U.S.
Front Street Canadian Hedge - Monthly Commentary
The month of July was poor for the overall TSX Index, which was down 6.04%, but it was a nasty month for the materials and energy sub-indices, which were down 12.18% and 13.00% respectively. To put this performance into perspective, it has been close to three years since energy stocks have had such a weak month and it has been six years since materials have recorded such a decline.
FRANK MERSCH - Q2 2008 COMMENTARY
With the bottom of the credit crisis panic in mid-March (the Bear Sterns rescue being the symbolic low-point), the second quarter of the year saw global capital markets return to operating in a fashion that we consider to be ‘nearly normal’. While the economic and corporate news remains mixed, markets are functional, assets are being revalued and, if necessary, disposed of (albeit typically at sharp discounts), and investor psychology has steadily improved.
Front Street Canadian Hedge - Monthly Commentary
After putting in two solid months of gains in April and May, global equity markets came apart in June as crude oil and a host of other commodities surged to new highs while financial institutions were once again under attack. The S&P 500 had its worst month since September 2002, declining 8.60%, while the NASDAQ fell an even greater 9.10%. The resource-insulated TSX managed to lose only 1.68% on the month, with double-digit gains in gold and fertilizers stocks offsetting sharp losses in virtually all other sectors.