Wednesday, July 30, 2014

Financial Comment - Big gains on Canadian Market

There is no stopping Canadian stock market
Or at least it appears that way right now. The S&P/TSX Composite Index keeps making new all-time highs this year. At around 15,450 points, the index is currently about 400 points above its pre-crisis peak which was set six years ago, in the summer of 2008. It has become a common place that 2014 has been a strong year for the Canadian stock market – the S&P/TSX Composite Index has risen almost 13.5% year-to-date – the best year-to-date performance among developed market stock indices. But in fact, the index has been steadily growing for more than 12 months now, since late June 2013. Over this period, it has risen by 30.5%.

The three biggest sectors of the Canadian stock market, namely, financials, energy and metals and mining, have been among the biggest gainers over this period. The S&P/TSX Capped Financial Index is up by more than 34% over the period on the continuing strength of the Canadian banks, insurance companies and other financial organizations. The S&P/TSX Capped Energy Index is up by almost 39% on strong oil prices.

The S&P/TSX Capped Diversified Metals & Mining Index has had a choppy 12-months period due to volatile commodity prices. The past month has been quite good for the sector as the index has climbed 14%. As a result, in the past 12 months, the index has risen by 42%.

Some analysts are expecting that the S&P/TSX Composite Index will slow its ascent in the second half of the year or even undergo a correction, which could mean a 10% or even more pull back. Even with strong fundamentals, this could occur strictly due to technical reasons. At the same time, technical issues may not be enough for a correction. For instance, the U.S. stock market has been rising without a major correction for almost two years now.

By: Ukrainian Credit Union Limited

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