2014 Canadian Market Recap
North American Equities provided average returns within 2014, with the DOW gaining 7.5% and the TSX gaining 7.4%. Major headlines included Ali Baba’s record breaking Initial Public Offering (IPO) of over $20 Billion, declining oil prices, and low interest rates.
Declining oil prices is definitely a big win for Canadian consumers, as goods become cheaper, thus leading to a 0.7% increase in household consumption during the Third Quarter of 2014 (Stats Canada). The price of oil fell to around $50/barrel, down from its peak of over $125/barrel during Summer 2014. A combination of a weakening demand and oversupply are the major cause of the decrease in price per barrel. The reduction in oil prices has negatively impacted the Canadian Economy. The growth of the Canadian GDP slowed to 0.7% in the Third Quarter, down from the 0.9% growth in the Second Quarter (Stats Canada). As a result of the declining oil prices, the Canadian Dollar declined approximately 9% in 2014. However, exports are benefiting from a stronger US Dollar, increasing 2.2% during Third Quarter of 2014 (Stats Canada). The stronger US Dollar provides the US Economy with an increase in Purchasing Power for Canadian Goods.
Canadian GDP Overnight interest rates through 2014 remained at 1%, thus contributing to the real estate boom, as the cost of lending remains low. Average Canadian home prices have a 1-year change of 3.1%, as of January 2015 (CREA). The 1% overnight interest rate positively contributed to the markets during 2014, as there is a negative relationship between interest rates, and investment levels. Despite the oil crash during the end of 2014, the markets continue to recover going into 2015.
Writer: Jelani Smith
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