The S&P/TSX Composite Index rallied into the final months of 2014, but collapsing oil prices led to a sharp selloff by year end.
As we head into 2015, the global economy continues to slowly expand. Although interest rates remain low, there are some indications that rates, at least in North America, could begin to move higher in the coming year. The key question for 2015 is whether the U.S. economy can continue to grow against the backdrop of a global slowdown. Investors will also need to weigh the impact of the strengthening U.S. dollar against falling energy prices. In the face of slower growth, interest rates are no longer expected to rise significantly. Nonetheless, the Fed is expected to begin rising rates during the second half of the year, which is expected to give continued strength to the US dollar. Should, however, the US economy succumb to slower growth, expectations for impending rate hikes might subside, resulting in a slip in the dollar’s value and possibly providing support to oil prices.
Nearly six years after the financial crisis, equities have delivered generally positive results, but markets are cyclical, and it is always difficult to predict their direction in any given year. While the sharp drop in oil prices has weighed on the Canadian equity market in particular, it is important to remember that asset classes, industry sectors and geographic markets often move in divergent directions. Lower oil prices, for example,can be positive for other sectors as they strengthen consumer confidence and reduce costs for manufacturers, transportation companies and related industries.
In our view, recent market events support the case for maintaining a portfolio that is well diversified across asset classes, geographical areas and industry sectors. Diversification will help to maximize returns for your portfolio, while mitigating risks as they occur, including currency and interest rate movements.
We work hard to develop the portfolio that best reflects your long-term financial goals and tolerance for risk. Should you have questions about your investments or any other issue, please feel free to give me, Terry or Anthony a call. We wish you all the best in 2015.