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In November, worldwide economic growth continued, bolstered by an increase in trade in the United States and all OECD countries. Global stock markets also continued to climb, thanks in part to a rise in corporate earnings.

Most fundamentals remain positive or neutral, including job creation and the purchasing managers’ index. For now, the high level of investor complacency is the main market risk.

Market situation at November 2017

Stock markets
  • The Canadian stock market posted a small gain in November, with the S&P/TSX index rising only 42 points (0.3%). The strong showing of insurance and consumer stocks was offset by the disappointing performance of industrials and oil producers.
  • In the U.S., equity markets were up 3.1% for the month on optimism fueled by economic and corporate profit growth. Technology stocks rose strongly again, but unlike what happened during the 2000 tech bubble, companies in this sector are posting solid earnings.
  • As far as international stock markets are concerned, some did better than others. The Japanese stock market gained 4.3%, while European and emerging economy markets treaded water. The London Stock Exchange was off 1.7%.

 Toronto Stock Exchange – November 2017
3 Best performances
  • Cameco Corp                                      +15.5%
  • Teck Resources                                   +12.4%
  • Dollarama                                              +9.8%
3 Worst performances
  • Crescent Point Energy                        -11.0%
  • Saputo                                                  -6.0%
  • Canadian National  Railway                 -3.0%

Bond markets
  • The drop in long-term yields pushed up the prices of bonds, which posted positive returns for the month.
  • The yields on 5-year government of Canada bonds climbed to 1.7%, almost twice as high as the level reached this summer.

Monthly highlights

  • The Canadian dollar remained stable against the U.S. dollar, closing the month at US$0.775.
  • The price of a barrel of oil was up for the month, closing at US$57.50, its highest level since 2015.
  • Commodity prices pulled back in November. Nickel fell 10%, while aluminum and copper lost 5% and 1%, respectively.

Focus on key events

  • OPEC members agreed to extend until the end of 2018 the oil production cuts implemented in early 2017, a decision that had already been discounted in current oil prices.
  • Black Friday and Cyber Monday retail sales in the U.S. set new records, contributing to American economic growth in November.
  • In Canada, more than 80,000 jobs were created during the month, pushing the jobless rate down to 5.9%, its lowest level in the past 10 years.
  • The Trump administration’s tax plan overcame major hurdles and the chances of it being approved by year end are high. This tax reform should boost U.S. economic growth by 0.3% and corporate earnings by 5% in 2018.
Risks to watch closely
  • According to a Morgan Stanley study, excessive policy tightening from central banks, an extreme build-up of consumer and corporate debt, and exuberant sentiment are the key factors that could derail the bull market.
  • The reduction of the U.S. Federal Reserve’s balance sheet could have negative repercussions, but since this monetary normalization policy is a first, uncertainty persists.
  • Certain geopolitical risks are still very real: tensions with North Korea, the trade dispute between the United States and China, the possible end of NAFTA, and the troubles in the Middle East.

A glance at our portfolio returns

In November, the Private Portfolio Management and Private Securities Management balanced portfolios posted positive returns again, due primarily to the very strong performance of international equities. The year-to-date return of these portfolios thus grew. Bonds also registered gains during the month.

Strategic perspective

The positioning of our portfolios will be influenced by the pace of monetary tightening by the Fed. At the time of writing, we are maintaining a slight overweight position in equities, mainly for the following reasons:

  • Conditions are favourable and the risk of recession remains limited.
  • Inflation is not a threat.
  • Corporate revenue and earnings growth continues.
  • Dividend yields are attractive relative to low bond yields.

Given high stock valuations and the fact that investor confidence is at a 30-year high, we remain cautious about the equity markets.


François Landry, CFA
Senior Vice-President and Chief Investment Officer

The opinions expressed here and on the next page do not necessarily represent the views of Professionals’ Financial. The information contained herein has been obtained from sources deemed reliable, but we do not guarantee the accuracy of this information, and it may be incomplete. The opinions expressed are based upon our analysis and interpretation of this information and are not to be construed as a recommendation. Please consult your Wealth Management Advisor.

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