Canadian stocks slipped in a muted conclusion to a year that saw the S&P/TSX Composite Index rally more than any other developed market.

The gauge fell 0.9 percent to 15,287.59 at 4 p.m. in Toronto on the last trading day of the year after a rally that has propelled the benchmark index to its sixth straight monthly advance. Weakness in material and energy shares offset gains in health care.

Canadian equities rose 18 percent in 2016, the biggest increase since 2009. The index now sits less than 3 percent from a record reached in September 2014. The S&P/TSX’s world-beating advance marks a reversal for the index, which slipped 11 percent in 2015 for its worst annual decline since 2008.

Looking ahead to 2017, the question becomes whether the torrid climb has left valuations overextended. To analysts like David Rosenberg of Gluskin Sheff & Associates Inc., elevated stock prices mean investors must be more selective about which industries to own.

“In an otherwise expensive market, sector focus will be that much more important in what will likely be a flattish year for the TSX,” Rosenberg, chief economist and strategist at Gluskin Sheff, said in an e-mail. “In that light we are heavily favoring the Canadian financials.”

Materials stocks were the best performers in the S&P/TSX in 2016, surging 39 percent. They benefited from gains of 8.6 percent and 17 percent in gold and copper, respectively. Teck Resources Ltd., Ivanhoe Mines Ltd. and Iamgold Corp. led gains in the commodity index, climbing more than 163 percent.

Energy shares in the S&P/TSX were the second-best performers in the group, up 31 percent. They tracked a 45 percent gain in the price of crude oil, which had plunged 62 percent over the prior two years. Enerplus Corp., Bonavista Energy Corp. and Seven Generations Energy Ltd. led all gainers in the commodity index, climbing more than 132 percent.

Source:
courtesy of BLOOMBERG

by Joseph Ciolli and Katia Dmitrieva

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