Blogs & Comment

Markets: Third quarter report

Another interim progress report.

It’s close enough to the end of the quarter that we can get a decent enough reading of how things have been going in the markets lately, and we rush to report that we have good news! The good news is that you won’t have to have done very well with your own stocks to beat what the indexes have done!

As a background note, these regular quarterly reports are intended to encourage all retail investors to keep track of your progress either as a do-it-yourself investor, or as someone keeping tabs on how your professional adviser is doing.

In both cases, remember, it’s your money. So it’s worth a few moments every quarter (and probably not more frequently) to see how your collection of securities is performing relative to some relevant benchmark. By the way, a benchmark is only relevant if it represents a true, investable alternative to the securities you’ve chosen.

For example, you can invest directly into the S&P/TSX 60 Index via its ETF units (TSX:XIU), so it’s investable; it would therefore also be relevant if the stocks in the S&P TSX 60 are the type of Canadian stocks you buy. (If the type of Canadian stocks you buy is of the penny miner variety, then of course it wouldn’t.)

Now to the hard facts. Since June 30 of this year, the S&P/TSX Composite Index is down 12.28%, so if your Canadian stocks are down an average of only 12%, you could be what Charlie Sheen calls ‘winning!’

This quarter the three main U.S. markets suffered similar setbacks. The Dow Jones Industrial Average is down 10.17% since June 30; the S&P 500 is down 12.10%; and the Nasdaq Composite has shaded off 10.42% of its value.

If you’ve diversified some of your portfolio into U.S. stocks like every good investor should (after all, it’s the world’s biggest economy), you may want to take into account that the Canadian dollar has dropped by 6.56% this quarter, so on a currency-adjusted basis, you’d have been better off in U.S. than Canadian stocks. That’s a bit of a head-scratcher, for sure.

(For a second head-scratcher, note that the Canadian dollar is worth only 96.9 cents right now, while the greenback is worth 100 cents. How the U.S. dollar can be worth more than the Loonie right now is anyone’s guess. Anyone? Anyone?)

Taking a quick peek around the rest of the developed world, it’s been similarly dismal. Of the 21 most advanced equity markets in the world, all 21 are in the red for this quarter, no exceptions. The worst has been the CAC 40 in Paris, down 23.97%, and the best Mexico’s Bolsa, down 8.53%.

In fact, you have to look pretty hard to find any winners at all this quarter. We’ll cling to the fact that inside the TSX Composite, two of its sectors net gained in value this quarter. Gold stocks rose 6.77%, and utilities 3.23%; consumer staple stocks had the smallest loss at 1.36%. The other sectors were down, led by metals and mining stocks, down 39.24%; energy stocks and industrials were down 22.37% and 19.74% respectively.

If you’re the glass half full type, you only need to look at this week’s trading so far to feel encouraged, despite the overall quarterly results. This week the S&P/TSX Composite Index has had two ‘up’ days out of three so far; one with a 2.13% gain, the other with a 0.97% gain; and today it’s headed to make it three out of four.

It’s not just the overall TSX that is up, either. The gains this week have been somewhat broadly based, with nine of the Composite’s 13 sectors in the green, and four in the red. Financial stocks have been the biggest gaining sector, up 4.64% to now. However, info tech stocks, utilities and consumer staple stocks (in that order) have shown good increases as well.

Thank goodness this quarter is (almost) in the books. Next quarter can’t be worse. Can it?