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What are we looking for?

S&P/TSX composite aggregate and sector-specific seasonal trends over the past 15 years, focusing on the period of Jan. 1 to March 31.

The screen

We look at the historical performance of the S&P/TSX composite index and various sector indexes during the first quarter of the calendar year. Seasonal anomalies reflect the market's tendency to produce similar patterns over time. This approach does not take any fundamental or technical factors into consideration.

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What did we find?

Information technology and materials have consistently outperformed the composite during the first quarter of the year, as demonstrated by three, five, 10 and 15-year average returns. Consumer discretionary and consumer staples have outperformed the index on a three, five and 10-year basis. On the other hand, health care and industrials have underperformed over the past three years.

Seasonal strategies should always be approached with caution as they are not standalone tools that can explain sector return drivers, but are simply an observation that could be used in conjunction with fundamental analysis.

Comparing the composite with individual sector returns also highlights the lack of diversification in Canadian markets, at least if we look at the 15-year average, where the three biggest sectors – financials, energy and materials – closely match the composite's performance as a whole, a function of their higher weightings. Their current market capitalizations as a percentage of the composite are 34.7 per cent (financials), 19.8 per cent (energy) and 11.6 per cent (materials).

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.

S&P/TSX composite index and sector returns: Jan. 1 to March 31

Index2003200420052006200720082009201020112012201320142015201620173 Yr Avg.5 Yr Avg.10 Yr Avg.15 Yr Avg.
S&P/TSX composite index-4.104.443.967.441.99-3.49-2.972.485.013.662.545.241.853.721.702.423.011.972.23
S&P/TSX Consumer Discretionary Index -9.99-0.02-1.105.344.29-14.95-8.575.45-2.4613.1511.793.715.572.426.474.825.992.261.41
S&P/TSX Consumer Staples Index-4.14-0.504.93-1.39-0.91-7.54-6.53-0.422.376.785.166.593.379.192.825.135.432.181.32
S&P/TSX Energy Sector Index-0.386.6413.4011.120.411.31-1.28-3.4310.10-1.851.878.11-1.405.63-9.60-1.790.920.952.71
S&P/TSX Financials Sector Index -0.437.122.386.182.21-9.14-7.507.128.5310.223.461.35-3.012.472.600.691.371.612.24
S&P/TSX Health Care Index -0.654.07-5.898.24-3.62-0.89-5.396.6419.9916.4613.965.6928.01-28.01-3.18-1.063.295.333.70
S&P/TSX Industrials Index-14.01-3.136.939.977.25-3.04-13.205.277.764.1113.961.67-0.283.034.062.274.492.332.02
S&P/TSX IT Sector Index0.0630.10-7.209.66-1.49-15.056.347.0911.479.7415.816.298.48-0.876.764.797.295.615.81
S&P/TSX Materials Index-12.03-2.22-2.7815.672.989.036.68-0.14-1.95-0.02-10.7410.224.4621.015.9110.466.174.453.07
S&P/TSX Telecommunications Index0.740.858.11-1.447.01-11.47-7.883.013.67-0.389.052.22-4.079.696.053.894.590.991.68
S&P/TSX Utilities Index-3.931.861.05-9.86-6.89-6.47-13.001.940.04-0.05-1.057.542.528.346.105.654.690.59-0.79

Source: Thomson Reuters Eikon