Reflecting back on 2011, it is safe to say that we witnessed a number of changes and challenges, the first starting with 2011 being a challenging year for public companies in Canada. At the beginning of January we witnessed markets in negative territory for the first two out of three weeks, setting the stage that would carry through the majority of the year.
The S&P TSX Composite Index reached its yearly high in the first week of March as the main Canadian index surged above 14,000 for the first time since May of 2008. Gold was surging to new highs, on its way to $1,900 an ounce but the resource heavy Canadian exchanges simply did not follow. Ironically when Gold seemed to peak in September at $1,920 an ounce and then began its subsequent fall to year end levels around $1,550, the TSX and Venture exchanges followed its downward path.
Canadian economic data held steady as we continued to witness low interest rates, unemployment numbers were far less than its U.S. counterpart and our housing sector remained relatively healthy. However it still was not enough to prop-up the exchanges as the Euro zone continued to witness financial woes, slowing demand from China and a struggling U.S. economic recovery tempered consistent data from Canada.
It is always difficult to decide which stories were the most interesting but we cannot forget about Canada’s tech darling, Research in Motion, the maker of the Black Berry, as they dominated headlines throughout 2011. Shares that were once trading around $160 before the financial collapse in 2008 have been pummeled annually since and this year was not different. Institutional investors have been calling for the company to consider selling itself, to sell its wireless patents and to even split the Co- CEO positions currently held by Mike Lazaridis and Jim Balsillie to raise shareholder value. Toss in some global blackout issues, reduced demand and stiff competition throughout the industry, shares of RIM have lost 75 percent of their value.
Another story that continues to garner headlines is the Keystone Pipeline project. Backed by Calgary’s TransCanada Corp., the proposed project would ship up to 700,000 barrels a day from Alberta's oil sands to the U.S. Gulf Coast, but has met stiff resistance from environmental activists along the proposed route. Temporarily on hold, the U.S. State Department has stated that it won’t make a decision on the project until after the 2012 presidential election in November.
Canadian personal finance was also a major point of discussion throughout the year with many analysts, industry watchdogs and even the Bank of Canada Governor all signaling alarm bells over Canadian household debt, primarily stemming from the booming Canadian housing market. While housing prices on a national level continued to defy negative market forces, most of the upward pressure came on the backing of increased consumer debt.
Not directly market related, the Canadian elections of 2011 are certainly worth mentioning. The death of longtime New Democrat Party leader Jack Layton, which came only months after he led the NDP to its best showing in history and becoming the official opposition in the house of commons was one of the top Canadian news story in 2011. This also witnessed the Conservative majority winning a majority and drastically changing Canada’s political landscape from what we have seen over the last several years.
International turmoil took center stage as protests in the Middle East heightened concerns about oil supply routes being shut-down and the massive earthquakes and tsunami that rocked Japan crippling the Fukushima Dai-ichi nuclear plant and threatened radiation exposure to millions of people and products.
However it was the Euro zone debt crisis that dominated the business year in 2011, captivating all of us as we watch and waited.
The first week in November was a particularly grim time in the Euro zone, as the sovereign crisis entered an alarming new phase. The governments in Athens and Rome were in chaos and there was panic on world markets as Germany and France were reported to have begun preliminary talks on a breakup of the Euro zone. German Chancellor Angela Merkel's one-word summary of the situation “unpleasant” must qualify as one of the biggest understatements of the year.
Across the Atlantic, the full enormity of the European debt crisis finally hit home as Standard & Poor's fuelled fears of the contagion spreading with a strong warning about America's failure to tackle its budget deficit. The ratings agency cut its long-term outlook for the world's most powerful economy for first time since Pearl Harbor was attacked 70 years ago, sending shares falling heavily on Wall Street. The move was seen as a "shot across the bows" of bickering politicians in Washington.
Greece was a daily headline and Greek Prime Minister Papandreou clung to power amid growing outrage in the Euro zone over his extraordinary plan to hold a public referendum on the debt deal. There was open war fare in the Greek cabinet as Papandreou faced a confidence vote which saw him abandon the controversial plan and eventually lead to his resignation.
Headlines then shifted to Italian Prime Minister Berlusconi to resign once the country's parliament approved an austerity budget for 2012. The move came after Berlusconi lost his parliamentary majority with just 308 MPs supporting him in a vote on last year's public finances.
In Greece, talks continued over the formation of a "unity" government and European finance ministers gathered to discuss the crisis.
In what was not seen as a particularly helpful comment, Cameron urged Europe to deliver on its promises. "Sort yourself out and then we will help." George Soros, meanwhile, warned that Europe faces a lost decade.
Our 2012 outlook will be out shortly but I am sure it will be another year of capturing headlines
Wishing you and your family, a Prosperous New Year from all of us at NorthBay Financial Services.
If you would like more information or would like a review of your investment portfolio and current financial plan, please call 778-478-9759, or e-mail [email protected]
This column is presented as a general source of information only and is not intended as a solicitation to buy or sell investments, or life insurance, and should not be taken as providing, investment, financial, legal, accounting or tax advice. All services provided through NorthBay Financial Services. Mutual funds are provided through Sterling Mutuals Inc. Insurance is provided through multiple carriers. The opinions expressed are those of the authors and do not necessarily reflect the views or opinions of Sterling Mutuals Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds and Segregated funds are not guaranteed, their values change frequently and past performance may not be repeated.