Last year the best for Canadian stocks since 2009

It was a great time to be invested in Canada.

Morningstar Research Inc. has released preliminary 2016 year-end performance data for its 44 Morningstar Canada Fund Indices. Of those, 39 increased during the calendar year, with 10 indexes increasing 10% or more.

Read: Why it’s not too late to buy Canada

The S&P/TSX Composite Index posted a total return of 21.1% in 2016, marking the best calendar-year performance for Canadian stocks since 2009. Yet the fund index that tracks the purely Canadian equity category increased only 17.7%.

Funds fared better on a sector basis. Financials, energy, and basic materials returned 24.2%, 39.6%, and 41.2%, respectively. Morningstar’s indexes tracking precious metals equity, natural resources equity, energy equity, and financial services equity, were up 54.0%, 41.0%, 36.1%, and 24.3%, respectively.

Since the Canadian dollar appreciated against many major currencies in 2016, several foreign equity funds suffered. In the European equity category, “funds collectively lost 5.5% despite strong market performances in France, Germany, and the United Kingdom; the loonie gained 6.1% against the euro and 23.2% against the U.K. pound during the year, pushing European equity funds to the bottom of the 2016 performance table,” says Morningstar in a report.

The U.S.

The Dow Jones Industrial Index had its best year since 2013, though it narrowly missed 20,000 and finished 2016 at 19,762.60. That’s up 2.337.57 points from the previous year, or 13.42%. As S&P Global managing director Jamie Farmer noted in a report, “While the march to that hotly anticipated 20,000 level generated more than a few exclamations and press citation, it is important to recognize […] that these round numbers have no more significance or import than any other level.”

On a stock-by-stock basis, Goldman Sachs contributed the most to Dow, particularly after the U.S. election, while Nike was the biggest detractor. Sector-wise, Financials performed best, while Consumer Discretionary performed the worst.

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As for the S&P 500, its total return was 12%, but Morningstar funds in the U.S. equity category significantly underperformed: the Morningstar U.S. Equity Fund Index increased just 6.4% for the year. “Currency movements only explain part of the underperformance, as the Canadian dollar appreciated 3.1% versus its U.S. counterpart,” Morningstar says.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.