TORONTO - Despite some end-of-year declines, investors appear eager to build on the overall gains of 2014 as markets begin their first full week of trading in the new year.
"Traders will probably be shaking off the doom and gloom of the last couple of weeks and starting the year fresh and with a better perspective," says Paul Vaillancourt, executive vice-president of private wealth at Calgary-based Fiera Capital.
On the Toronto Stock Exchange, the mood improved early as the TSX rebounded to a triple-digit gain on Friday after closing out 2014 with a small decline on Wednesday.
The TSX ended 2014 in positive territory, up seven per cent overall, although down from its highs of the year and an almost 10 per cent advance in 2013.
On Friday, the S&P/TSX composite index finished the first trading day of the year up 121.21 points at 14,753.65.
Vaillancourt said that a lot of what will be driving equity markets in 2015 is an anticipated strong performance from the U.S. economy, which seems on track with its recovery. This will likely lead to a similarly positive showing in the Canadian economy and may be enough to offset the plunge in crude prices, should it continue.
"The U.S. economy is going to continue its strong leadership and our view is that Canada will benefit on the export side, clearly not the energy export side, but manufacturing and so on," he said. "(Traders realize low oil) is not the end of the world."
New York markets, although down slightly on Friday to start the year, also finished 2014 on the plus side, with the Dow ringing out 2014 up 7.5 per cent year over year, the Nasdaq finishing 13.4 per cent higher and the S&P 500 up 11.4 per cent.
Markets advanced last year even as the U.S. Federal Reserve wrapped up its massive program of buying bonds — a program that has helped keep interest rates low and been a huge aid in the recovery of stock markets since the 2008 financial collapse.
Investors have come around to accept that the Fed will move to start hiking rates, likely around the middle of 2015. However, traders will take note of Fed minutes being released Wednesday from the central bank's last meeting on Dec. 16-17. They will be looking for additional assurance that the Fed will continue to exercise patience as to the timing of its rate hike.
Even more importantly, they will look to the latest U.S. jobs data for December for signs that employment growth remains strong, helped by crude oil prices which have fallen more than 50 per cent in recent months.
"What we're assuming is that job growth will remain resilient as lower oil prices ignite additional hiring in other sectors of the economy," said an analyst note from Scotiabank Global Economics.
Vaillancourt said if traders get the data they want, markets will likely continue to lift.
"The bottom line is that we'll see a continuation and confirmation of what we've been seeing: pretty solid velocity for the U.S. economy not only as it translates to Wall Street, but also to Main Street," he said.
Crude prices will remain a big story in 2015, as oil prices have continued to slide towards fresh five-year lows. In June, oil was as high as US$107 a barrel, but has since tumbled more than 50 per cent due to low demand and a global oversupply. On Friday, the February crude contract on the New York Mercantile Exchange was down 58 cents at US$52.69 a barrel.
Vaillancourt said it's difficult to predict commodity prices due to potential geopolitical risks that don't always hinge on supply and demand. Regardless, he expects oil to climb back to at least US$70 a barrel in 2015.
"That's where we could see things levelling out in the new year," he said.
In Canada, a slew of economic data will also be released including the new housing price index due out Thursday and the latest housing starts and building permit figures set for release on Friday.
"This trio of housing reports is expected to show the sector is still in decent shape," said a commentary by BMO Capital Markets.
There will also be the latest employment figures from Statistics Canada out on Friday, with analysts expecting to see an addition of 10,000 jobs in December.
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