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Bank buildings tower over the corner of Bay Street and Adelaide streets in Toronto.Gloria Nieto/The Globe and Mail

Watching the S&P/TSX Composite index plummet in the first two weeks of December, Canadian investors may have started to despair that they'd find naught but coal in their stockings this year.

Instead, Christmas came a bit early, with Canada's benchmark index posting its best one-week gain in three years during the five sessions ending December 19.

Much of the credit for the festive spirit pervading Bay Street is owed to Federal Reserve Chair Janet Yellen. Last Wednesday, the world's preeminent monetary policymaker reassured the markets that the U.S. central bank is unlikely to raise rates until April, at the earliest. She vowed to be "patient" when beginning to inch rates away from zero, quelling fears that a hawkish Federal Reserve would soon derail the long-running rally in equity markets. Both the S&P 500 and the S&P/TSX Composite enjoyed their best days of the year on the heels of Yellen's remarks, with the latter rising 350 points. Moreover, the spread between high-yield U.S. corporate debt and Treasury bonds posted a sharp decline in the days following this statement, a trend that has generally been supportive of equities historically and certainly was in recent sessions.

Prior to that, however, there were developments more specific to Canadian markets that heralded this swift turnaround.

The broad-based selloff early in the month pushed dividend yields on the major Canadian banks above 4 per cent, leading Credit Suisse analyst Kevin Choquette to say on December 12 that this group presents "one of the best buying opportunities since 2009." In this low-yield world, such an opportunity proved to be too attractive to ignore. The Financials sub-index has gained about 5 per cent since then, advancing in every session.

The December declines in the S&P/TSX Composite index were characterized by a sharp uptick in fear, as investors pondered just how much the carnage in the oil patch would impact other sectors. The S&P/TSX 60 VIX index, a gauge of investor sentiment for the largest Canadian stocks that tends to move in the opposite direction of these equities, surged to its highest level since mid-2012, peaking just below 24 on the morning of December 15.

As fear dissipated, greed has returned.

Since bottoming out below $54 per barrel (U.S.) on December 16, the price of the front-month contract for West Texas Intermediate futures has been range-bound between this floor and a ceiling of about $59 per barrel. Over this stretch, every minute uptick in crude oil has been followed by an outsized positive move in Canadian energy stocks. Equity investors' worries about a catching a falling knife have faded; instead, they're positioning to capture all of the upside if crude oil can break above its current trading range. The underlying commodity is little changed from December 15, while the Energy sub-index is up by more than 17 per cent. Before this recent rebound, the market had failed to adequately price in the extent to which cash flow generation in 2015 is slated to be adversely affected by the softening price of oil. As such, investors should proceed with caution before joining the horde of those whose investment theses are predicated on hopes of a material rally in crude oil that has yet to materialize.

While this semblance of stability in crude oil is cause for relief (though not exuberance!), the bigger picture is that this low oil environment has sparked a change in sector leadership on Bay Street. Since mid-October, the Consumer Discretionary and Consumer Staples sub-indices, which account for about one-tenth of the S&P/TSX by market capitalization, have risen by roughly 20 per cent.

While the outlook for 2015 remains cloudy, the stimulus to Canadian households thanks to lower oil, which has also coincided with a substantial drop-off in the value of the loonie, provides an ample number of investment opportunities should current conditions persist.

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