Dec 30, 2022
TSX in 2022: A look back at how it performed
Choosing dividend growers over fixed income in 2023: Strategist
Canada's main stock market index had a volatile year – though it still managed to outperform its U.S. peers.
The S&P/TSX Composite Index posted a negative return of 8.5 per cent year-to-date to investors.
The biggest drag on the index came from the health care, technology, and real estate sectors. Among them, the worst performing stocks were Bausch Health Companies Inc., Shopify Inc., and Canopy Growth Corp.
“What we saw was this year from the TSX was a very dramatic trend reversal compared to the last 10 years of returns,” Patrick Horan, a portfolio manager at Agilith Capital, told BNN Bloomberg in a phone interview on Dec. 23.
Horan explained that investors had become comfortable with a low-interest rate environment and central banks around the world appeared to share the sentiment. This all changed once the Bank of Canada had to get inflation under control amid labour and supply chain crunches that came as a result of the COVID-19 pandemic, he stated.
“When the world was forced to deal with inflationary pressures, interest rates hiked dramatically and that meant a lot of volatility for the markets at large,” Horan said.
South of the border, the Dow Jones industrial average provided a negative return of 8.88 per cent, while the S&P 500 index posted a negative return of 19.24 per cent. The tech-heavy Nasdaq Composite provided ate away at investors returns the most with a negative 33.63 per cent return.
One bright spot that set the TSX aside from its southern counterparts was the index’s strong performance in the energy sector.
Among the top-performing TSX sectors this year were energy, consumer staples and materials. The biggest stock gainers were Spartan Delta Corp., Precision Drilling Corporation. and Athabasca Oil Corporation.
“Canada’s stock market benefits most in a cyclical market environment – and commodities can really set the tone,” Greg Taylor, the chief investment officer at Purpose Investments, told BNN Bloomberg in a phone interview on Dec. 23.
Taylor explained the strength throughout the energy sector drove a large part of the TSX’s gains in 2022.
The price of oil served as a major headwind for the sector’s gains. Oil reached a high of US$123.70 per barrel in 2022. It has since fallen to $78.41 dollars.
Taylor believes the TSX’s outperformance in 2022 mirrored its performance shortly after the 2000’s dot come burst – which he indicated is being repeated today with the significant underperformance of the major present-day tech stocks that include Amazon, Facebook and Tesla.
“Once the early 2000’s tech bubble burst, the commodity markets did way better --- which led to a prolonged TSX outperformance. We believe history will repeat itself for the next few years,” he stated.