The Canadian stock index has jumped more than 5 per cent this year, and the benchmark Gilt Index is up nearly 20 per cent in 2017, according to data released Friday by the Canadian Securities Administrators.
That compares with an average gain of about 2 per cent for the benchmark S&P 500 index in the same period.
It’s the biggest annual gain in nearly four years, the data shows.
“The index is up by more than 25 per cent since March 2017, and its the biggest year-over-year increase in nearly a decade,” said Marc Lasry, the head of equity research at the Canadian Imperial Bank of Commerce.
“In 2016, the index was down by nearly 15 per cent, and it was up a whopping 10 per cent last year.”
“Gilt is up at the highest level since March 2016.”
Lasry said the benchmark index, which tracks companies on a range of securities, is up over 70 per cent from last year.
“Gilts are up at least 50 per cent year over year,” he said.
“It’s a record-setting performance.”
The benchmark index of small and midcap companies is up about 18 per cent over the past year, but that is more than half the increase in the benchmark Canadian dollar index, the latest version of which was released in August.
That has made the Canadian dollar more attractive to investors.
The Canadian dollar rose about 3 per cent to 87.20 US cents US, and has risen by about 3.5 per cent against the U.S. dollar since its low of 76.05 US cents on Sept. 10, 2016.
Lasry noted that Canada has historically seen a strong rebound in the Canadian economy.
“Canada has been in a recovery mode,” he added.
“I’m not surprised.
It was there, it was there.”
In 2016, Canada recorded an average annual gain of 3.9 per cent and was the fifth-highest-performing economy in the G-7 group.
But Lasry says there’s still a lot of room for improvement.
“We’re still a long way from the end of the recovery,” he noted.
“If we don’t have a full recovery, we’re going to have a very difficult time keeping up with growth.”
For example, he said, the pace of economic growth is likely to slow significantly over the next decade.
Lasery noted that many of the gains in the stock market are concentrated in a small group of companies, but said that those companies are not necessarily the biggest winners.
“A lot of the stock markets in Canada are smaller companies,” he explained.
“So, even if a company is doing well, they’re not necessarily doing so well, and that’s why I’m worried about them.”
The Gilt index is the market-based version of the S&s.
Lasrey said he believes the Gilets will benefit from the weaker dollar.
“As the dollar strengthens, you’re going into a higher-yielding position, and you’ll see higher returns, more capital flows into the market, and so on,” he pointed out.
The Gilet Index has risen in recent years as companies have taken advantage of a weaker dollar and a weakening U.K. economy.
The index has increased about 5 per 100,000 Canadian dollars since December 2015.