Canadian shares outperformed their worldwide rivals in the fourth quarter, ending the year with a 6.5% yield and a 27% annualized return.
The TSX Composite Index returned 6.5% during Q4, bringing the year’s overall return to 25.1%. Barring healthcare, every economic sector in the benchmark delivered positive returns; Energy and Financial performed yearly with 48.9% and 36.5% respectively.
In Q4 2021, foreign equities gained 5.3%, resulting in an annualized return of 17.1%. As the Canadian dollar strengthened, local currency returns for the unhedged pension plan took a hit. The financial and information technology sectors led the MSCI World Index with a 7.5% return in Q4 2021 and a 20.8% annualized return. In foreign equities, US stocks outperformed their counterparties by a wide margin.
Emerging market equities, as reflected by the MSCI Emerging Markets Index’s decline of 3.37%, lost ground in 2021. This was mostly on account of heavy losses in Chinese markets as the MSCI China benchmark maintained an annualized loss of 22.4%.
Fixed income assets in Canada grew 2.7% in the fourth quarter of 2021, but were down -1.9% for the year. The FTSE Canada Universe Bond Index, on the other hand, returned 1.5% for the quarter and -2.5% for the year.