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Posted by Simon Pagé, Group Insurance and Group Annuity Plans Advisor, February 21 2018
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2017: An Outstanding Year For the Stock Market

Stock-market.jpg

As you probably noticed in your recent annual statement, your pension plan posted solid returns in 2017. This is not surprising, as the stock market performed strongly last year, in spite of political turmoil. Healthy financial market performances were driven by a rarely seen synchronized global economic expansion. Economic growth generally picked up in 2017, and corporate earnings were in sync.

Whether you are a pension plan sponsor or an individual investor, it is important for you to understand the stock market results in order to be able to assess the performance of your plan managers. With this in mind, we prepared the following summary of key stock market developments in 2017.

Canadian stock market

The Canadian economy performed very well in 2017, generating strong growth. Stocks rose by a highly acceptable 9.1%. However, the Canadian stock market lagged most other global developed markets.

Unemployment continued to drop, falling to a 40-year low of 5.7% in December 2017, vs. 6.9% a year earlier. Quebec did particularly well, with a 4.9% unemployment rate, beating the Canadian average.

Moreover, the Bank of Canada rose its policy rate twice in 2017, from 0.5% to 1.0%, the first increases in seven years.

american stock market

Despite the uncertainty created by Donald Trump’s election in late 2016, the U.S. economy is in great shape and ran at full speed in 2017. Business and consumer confidence stand at record highs.

The stock market also kept its momentum and set many new records. The S&P 500 posted a 21.8% return (13.7% in Canadian dollars), easily outperforming the Canadian market.

Unemployment reached a low of 4.1% in December 2017.

European stock market

Europe enjoyed impressive economic growth in 2017, driving strong consumer confidence. Political concerns surrounding the French and German elections and Brexit did not materialize, which positively impacted financial markets.

Unemployment continued to decline and the euro rallied more than 14% against the U.S. dollar. This stands in stark contrast with the last decade.

Other markets

Emerging markets were the performance champions in 2017.

After a 7-year slowdown streak, China’s economic growth accelerated to 6.9% in 2017. Stock market returns were astronomical, i.e. 55% in local currency (almost 44% in Canadian dollars).

In Japan, despite very weak inflation, the economy improved and unemployment reached a historically low level. The stock markets performed particularly well further to Prime Minister Shinzo Abe’s re-election in October, that guarantees monetary policy continuity.

Economic Indicators

Below is a summary of the key economic indicators for 2017 and 2016:

 STOCK MARKET INDICES   YEAR 2017   YEAR 2016 
S&P/TSX 9.1% 21.1%
S&P 500 (CAD) 13.7% 8.6%
MSCI World (CAD) 14.2% 3.8%
FTSE TMX Canada Universe 2.5% 1.7%

 

 ECONOMIC INDICATORS   YEAR 2017   YEAR 2016 
USD / CAD 0.7971 0.7448
Euro / CAD 0.6644 0.7058
Oil (USD) $60.42 $53.72
Gold (USD) $1,302.50 $1,150.90
CPI 1.9% 1.5%
Unemployment 5.7% 6.9%

 

If you have any questions about the economy or the performance of your pension plan, please do not hesitate to contact our experts today.

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Group Insurance and Group Annuity Plans Advisor | Holding a Bachelor of Actuarial Science degree, and Associate of the Canadian Institute of Actuaries, Simon Pagé worked as group annuity plans advisor for large consultants and actuarial firms. With his 15 years’ experience, he has developed a renowned expertise, notably in the selection, development and implementation of annuity plans. In addition, Simon holds a permit in group insurance adding to his expertise and bringing a global vision in benefits related issues for his clients.
Simon Pagé, Group Insurance and Group Annuity Plans Advisor