investment review
December 31, 2011 - Report Highlights
The escalation of the European debt crisis dominated world headlines in the fourth quarter. Most of Europe is looking to implement severe austerity measures, including both spending cuts and tax increases. Therefore it will be extremely difficult to expect much in the way of economic growth out of Europe in 2012. The picture in the U.S. is more uplifting with positive indicators evident in employment and the housing sector, which have contributed to a strong rebound in consumer confidence. Canada is paying close attention to China given its impact on demand for commodities and hence pricing. With evidence of a slowdown there, the Chinese government has begun to ease monetary policy.
Asset Mix
An increase in equity exposure in the third quarter was rewarded in the short term with global markets lifting out of the third quarter doldrums. We continue with a slight underweight to bonds. The environment is quite unusual with the dividend yield on the stock market now higher than the interest rate on government of Canada bonds; this hasn’t happened since the 1950s.
