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What are we looking for?

Seasonal trends for the S&P/TSX composite index – aggregate and sector-specific – over the past 15 years, focusing on the period from Oct. 1 to Dec. 31.

The screen

We revisit historical performance of the S&P/TSX composite and various sector subindexes during the fourth quarter of the calendar year. Seasonality reflects the market's tendency to produce similar patterns throughout the same period over different years. This approach does not take any fundamental or technical factors into consideration.

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What did we find?

Sectoral five-, 10- and 15-year average returns demonstrate that the consumer-staples, consumer-discretionary, industrials, telecommunications and information-technology sectors have consistently outperformed the S&P/TSX during the last quarter of the year, while the opposite is true of the energy and health-care sectors. Seasonal strategies should always be approached with caution as they are not stand-alone tools that can explain sector return drivers, but are simply an observation that could be used in conjunction with fundamental analysis.

Comparing the S&P/TSX composite's performance with individual sector returns serves to highlight the lack diversification in Canadian markets. A disproportionate concentration of market value lies in financials, energy and materials sectors; their current weightings as a percentage of the S&P/TSX are 34.6 per cent, 19.7 per cent and 11.8 per cent, respectively.

This commentary does not provide individualized advice or recommendations for any specific subscriber or portfolio. Investors should conduct further research before investing.

Khaled Eniba works in the financial and risk unit of Thomson Reuters and specializes in banking and research.

Calendar fourth-quarter performance (Oct. 1 - Dec. 31)

Index2016201520142013201220112010200920082007200620052004200320025Y Avg.10Y Avg.15Y Avg.
S&P/TSX Composite3.81-1.75-1.176.030.512.858.746.09-23.28-2.599.752.375.719.476.371.49-0.082.19
S&P/TSX Consumer Discr.1.01-5.4514.176.514.40-0.246.807.80-12.10-5.368.180.287.737.463.774.131.753.00
S&P/TSX Consumer Staples-1.541.7219.553.008.242.425.539.822.78-8.076.82-7.4710.129.29-2.786.194.343.96
S&P/TSX Energy Sector10.57-1.91-22.772.49-5.2611.2612.236.61-29.461.155.65-3.675.3513.89-0.43-3.38-1.510.38
S&P/TSX Financials Sector10.560.491.139.205.57-0.154.720.46-30.88-6.978.807.076.278.329.405.39-0.592.27
S&P/TSX Health Care-13.856.186.076.24-5.653.145.830.96-15.81-9.8614.63-2.70-7.20-6.915.32-0.20-1.67-0.91
S&P/TSX Industrials4.78-2.820.9414.056.9614.495.3110.09-14.66-7.609.482.178.087.644.854.783.154.25
S&P/TSX IT Sector-0.819.0116.407.3310.94-7.568.8310.10-18.866.4516.08-0.656.502.3741.018.574.187.14
S&P/TSX Materials-6.486.44-7.03-1.18-7.50-4.5414.1210.44-12.531.1820.339.442.1420.748.08-3.15-0.713.58
S&P/TSX Telecom-2.93-0.117.584.383.177.15-0.236.64-11.92-6.32-3.11-5.4615.717.4411.192.420.742.21
S&P/TSX Utilities-1.54-1.954.170.65-0.35-0.263.4413.65-11.023.528.133.499.967.83-5.010.191.032.31

Source: Thomson Reuters Eikon