Foreign Equity Pool Quarterly Review
For the period ending
June 30, 2010
MARKET OVERVIEW
The global economic recovery has begun to falter as nations move away from massive stimulation of their economies and toward the implementation of austerity measures designed to reduce annual deficits and rising total indebtedness. Without increased participation by consumers and corporations to take up the slack left by governments gradual withdrawing of support programmes, the outlook is for more modest global growth. With consumer confidence weakening and with corporations continuing to hoard their substantial cash holdings, the near term outlook remains worrisome. With all the problems that persist in Europe, with evidence that the Chinese economy is slowing and with the US recording only a modest recovery, investors have become increasingly skeptical about the future and are employing risk averse strategies to protect their portfolios. Consequently, equity markets have come under pressure, the highest quality bonds are greatly sought after and the risk of deflation in the US and many other nations has escalated.
In the second quarter, the S&P/TSX Composite Index declined 5.5% while the Morgan Stanley World ex-Canada Index was off 8.6%. With bond yields continuing to decline, the DEX Bond Universe increased 2.9%.
In this environment, the second quarter return for the Fund was -10.1%.
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