Market Commentary

 Home / Resources / Market Commentary

Q2 Review - Market Commentary 2013

This quarter saw volatility in fixed income and emerging markets but strength in blue chip stocks – especially US stocks. Year-to-date the TSX is nearly flat whereas the S&P 500 is up a whopping 19% in Canadian dollar terms.

After an impressive run, bonds and other fixed income investments finally suffered a long overdue correction. As mentioned in our previous market commentary, this correction came as no surprise. Being overly weighted in equities and cash and underweight in fixed income, our portfolios were well-positioned for the events of this quarter.


The cause of the fixed income correction followed the most elementary law of economics; supply and demand. There were two catalysts to the correction: firstly, US Federal Reserve chairman Ben Bernake said that the Fed may reduce its practice of buying treasuries known as quantitative easing. This would reduce the demand for bonds and therefore their value. Secondly, we saw long term interest rates rise. Whenever interest rates rise, the value of existing bonds decreases.


In a somewhat unusual parallel, emerging markets (higher risk/higher reward) fell in tandem with bonds (lower risk/lower reward) while dividend paying blue chip stocks (medium risk/medium reward) performed relatively well. When the mood of the market is fearful, bond values usually rise and emerging markets usually fall as investors seek safety. Conversely, when investors are confident and greedy, emerging markets usually rise and bond values fall. The unusual parallel here was due to an unusually long rally for bonds, a gradual slowdown in China, and geo-political tensions in the Middle East. On the other hand the continuing strength of the US recovery boded well for US equities.

In North America, the US continues to outperform Canada by leaps and bounds. The Greenback is up nearly 6% year-to-date, as the US housing recovery continues and commodity prices tumble, in particular gold, down 27% in 2013. The cyclical materials and mining sector that was Canada's pride during the commodity boom is now our Achilles heel –this is especially pertinent here in Vancouver with rampant unemployment in the previously prosperous mining community. It's not all gloomy for Canada though; we still have one of the strongest banking systems in the world and a wealth of resources. Eventually commodity prices will rise with demand from Asia, and when they do investors will reap the rewards. In the meantime, the defensive nature and stability of our financial services sector helps to offset the volatility in resources.


Regardless of your investment objectives and risk tolerance, it's important to have some exposure to Canada, the US, developing economies, fixed income and real estate – market conditions and your personal situation will dictate how much of each you should own. Much like the benefits of a well-balanced diet, the various asset classes all play an important role in a well-balanced portfolio. Please feel free to contact us to discuss your investment and financial planning needs.


All the best,

Anthony Ciccone, B.Comm., CHFC


PS: Since asset allocation is the most important factor in the performance of a portfolio, many of our clients are turning to land based investments to diversify away from the stock market. Please contact us for details.

Contact Us Today

Email us at or call us: 604-688-5262

About Ciccone/Mckay

Ciccone/McKay Financial Group is an independent financial services firm with over 75 years of combined experience in the areas of risk management, wealth management and employee benefits.


We specialize in providing insurance and investment solutions for our clients, helping businesses, individuals and families grow, manage, protect and transfer their wealth.

Read more

Contact Us

  • Ciccone/McKay Financial Group
    Suite 360 - 1095 West Pender Street
    Vancouver, British Columbia
    V6E 2M6