Palisade Research - Tue, May 23, 2017

S&P Is Reaching Record Highs, But The TSX Venture Is Where The Money's At!

silhouette of a bear opposing a bull with background arrows pointing up and down

Since inception, the S&P 500 has shown steady growth. In fact, if you had bought the index in January 1950 and held until now, your investment would be up a cool 14,000%. Compare that to the TSX Venture, where a buy and hold strategy since inception in 1990 would have yielded a return of -7.0%. The reason for this difference is the absolute cyclicality of resource market versus general equities.

Since 2011, the S&P has plowed ahead, while the TSX Venture became mired in its worst and longest bear market. The S&P has gained 61% at a time while the Venture gave up a staggering 77%. Ouch!

line chart showing a 61% gain for the S&P 500 versus a -77% loss for the TSX Venture from 2011 to 2015

However, since the resource markets began to rebound in 2016, the dynamics have altered.

line chart showing a 21% gain for the S&P 500 versus a 71% gain for the TSX Venture from 2016 to present

The TSX Venture has outperformed the S&P 500 for the past 18 months in dramatic fashion, posting a 71% gain while the S&P rose just 21%. What's at play? General equity growth may be slowing. However the real factor here is the strength of cyclicality in a resource bull market.

Resource investors continually dwell on the never-ending bull market in the S&P - we have been quite vocal on the topic. The data outlined above puts a new perspective on things, a reminder that we are in a bull market and as the title of this article suggests, "The S&P is reaching record highs, but the TSX-V is where the money is at!"

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