Economy's strength not reflected in Canadian stock market, AGF manager says

Pessimism about energy has contributed significantly to the Canadian market's lacklustre performance so far this year, says Peter Frost.

Sonita Horvitch 23 August, 2017 | 5:00PM

Peter Frost, senior vice-president and portfolio manager at AGF Investments Inc., says that the negative sentiment surrounding the energy sector is a big overhang for the Canadian equity market.

Some energy names have experienced steep declines in their stock prices since the beginning of 2017, "The junior energy producers, in particular, have been decimated." As an indication of the degree of pessimism about the Canadian energy sector, even some of the brand name big-cap Canadian pipeline companies have seen a drop in their stock prices, says Frost. "Pipelines have traditionally been viewed as being fairly defensive."

What is puzzling, he says, is that the current crude oil price, at slightly below US$50 a barrel, is far higher than it was in early 2016, during the last bout of severe weakness in the energy sector. In January 2016, the oil price dipped below US$28, which represented a 12-year low in this commodity price. "Over the course of 2016, the oil price recovered to end the year at above US$50 a barrel, and the energy sector rebounded strongly."

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Bonterra Energy Corp1.46 CAD2.10
Manulife Financial Corp18.34 CAD2.29
Methanex Corp25.53 CAD4.67
Pason Systems Inc7.22 CAD-0.82
Sun Life Financial Inc49.85 CAD1.82
Vermilion Energy Inc5.92 CAD8.03

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Sonita Horvitch

Sonita Horvitch  

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