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Canadian Equities Thumbnail

Canadian Equities

Positive but adjust expectations.

This table features text accompanying heat diagrams for Canadian Equities. The heat diagrams, gauging Manulife Investments' outlook from Bullish to Bearish, indicate a stronger than neutral view on both, along with detailed rationales for each position.

Where commodities go, the S&P/TSX usually follows 


The S&P/TSX Composite Index has often been referred to as a commodity-linked index given that two of its largest sectors are materials and energy. As the global economy continues to recover from COVID-19 and government-forced lockdowns, the demand for commodities is expected to continue increasing. The increased demand should bode well for S&P/TSX returns.

S&P/TSX Composite Index vs CRB Commodity Index 

2000 – current 

This chart shows the relationship between the S&P/TSX Index level and the CRB Commodity index level from January 2000 to March 31, 2021. As the commodity level changes either up or down, the S&P/TSX level follows in a similar direction. Recently, the commodity index has moved up with the S&P/TSX.

Source: Manulife Investment Management, Bloomberg, as of September 30, 2021.


Elevated oil prices are likely to lead to strong S&P/TSX earnings.


Historically, earnings growth for the TSX has correlated with the change in the price of WTI YOY. We’ve seen a recovery in oil prices from negative-US$37/bbl in April 2020 to US$75bbl by the end of September 2021. Using US$70/bbl as a conservative average target price, we believe the global economic recovery will lead to higher crude demand and prices, contributing to strong S&P/TSX earnings growth into 2022.

Change in oil price (YOY) vs Change in S&P/TSX earnings per share lagged 3 months (YOY) 

1996 to March 2022 (Estimated)

This two line chart shows the year over year change in oil price (WTI) and the year over year change in S&P/TSX earnings growth on a monthly basis from january 1996 to March 2021. The earnings growth data is lagged three months. These two lines are strongly correlated. The shaded green area on the right most side of the chart highlights the continuation of the monthly year over year change in oil prices if the price of oil was $55 until Decemberr 2021. The line spikes higher to 190% before moving back down to 30%

Source: Manulife Investment Management, Bloomberg, as of September 30, 2021.

After a weak September, seasonality is now in your favour


September has historically been the weakest month for the S&P/TSX Price Index in terms of odds of a positive return. However, the fall and winter months have been strong months of the year with much higher probability of positive returns.


S&P/TSX Price Index, odds of positive monthly return

(1950–current)The chart on the left shows the valuation of the S&P/TSX financials sector on a Price to earnings, price to book and price to sales basis from January 2006 to March 31, 2021 and their respective averages. Price to Book and price to sales lines are below there long term average, whiel price to earnings line is slightly above its longe term average.

Source: Capital Markets Strategy, Bloomberg. As of August 31, 2021

Dividend growers outperform 

Using Bloomberg, our team screened the S&P/TSX Composite Index for companies with a five-year dividend growth rate of at least 10% and a payout ratio of no more than 70%. This screen was back tested and rebalanced on a quarterly basis, going back 10 years, to September 30, 2020. The model has a 10-year annualized performance of 7.65%, while the S&P/TSX Composite Index returned 4.92% over the same period. These results assume all dividends are paid out and not reinvested.

Capital Markets Strategy dividend growth model vs S&P /TSX Composite Index 

Cumulative Return (2011–2021)

This chart compares the compounded return of the S&P/TSX to a model portfolio of dividend growth stocks on a normalized basis. When calculating the two returns since 2010, the portfolio of dividend growth stocks outperforms the S&P/TSX, as of March 31, 2021.

Source: Manulife Investment Management, Bloomberg, as of September 30, 2021

Manulife Investment Management’s sample strategy

This proportional bar chart shows a rough breakdown, in percentage terms, of a sample portfolio of Canadian, U.S. and international equities and fixed income, including a brief outlook discussion for each asset class.

Canadian equities

• Favour a selective approach to Canadian equities.

• Consider diversifying business risks, not just sectors.


 US Equities

• Look for opportunities to take advantage of market dislocations.

• Consider dollar‑cost averaging into equities.

International developed market equities

• Consider less constrained strategies that can seek out opportunities wherever they may present themselves.

Emerging Market equities

Opportunities may exist within the emerging markets, specifically in the Asia ex‑Japan region.


 Fixed Income
• Favour flexible strategies that can seize opportunities wherever they may be.

•Consider using different types of bonds for different objectives, whether it is downside protection or enhanced yield.

•Be mindful of the potential currency impact on global allocations.



Source: Manulife Investment Management as of September 30, 2021. For illustration purposes only. Performance histories are not indicative of future returns. The information in this document does not replace or supersede KYC (know your client) suitability, needs analysis, or any other regulatory requirements. Clients should seek the advice of professionals before making any investment decisions.