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Business Briefing The ‘frankly astonishing’ lost decade on the Toronto stock market. (Now, if you’d bought a house in 2008 …)

Briefing highlights

  • The TSX’s lost decade
  • Markets at a glance
  • GE slashes dividend, to split power unit
  • What to watch for today
  • Facebook earnings in focus
  • Airlines cut ties to SeaWorld

Lost decade

These past 10 days have not been kind to the Toronto stock market.

For that matter, these past 10 years or so have not been kind to the Toronto stock market.

It has truly been a lost decade for Canada’s benchmark S&P/TSX Composite Index, which cracked 15,000 in mid-2008 and now sits below that mark in late 2018.

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Of late, of course, Canadian stocks have been caught up in the global rout. Or, as Bank of Montreal chief economist Douglas Porter put it in a report, the TSX missed out on the U.S. stock rally earlier this year, but has “fully participated” in the selloff.

But the 10-year look is nothing short of disheartening for investors as the TSX, which climbed back from the depths of the financial crisis to hit a record above 16,500 in July, only to sink again, putting us right back where we started from, to borrow from that old song.

Of course, total TSX returns have topped 38 per cent since mid-June, 2008, added Kevin Gopaul, head of BMO Asset Management Canada.

You’re sitting pretty now if you happened to invest in early 2009, but “it’s frankly astonishing that the Canadian equity market has made no net progress in more than a decade,” Mr. Porter added in an interview.

You’re also sitting pretty if you happened to invest in a house in May, 2008. Prettier still, if that house happened to be in Vancouver or Toronto.

Obviously, it’s not a direct comparison.

Nonetheless, Canadian home prices are now up by almost 72 per cent since that date, according to the Teranet-National Bank house price index. Vancouver prices are up 95 per cent, and Toronto prices by almost 115 per cent.

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“There are any number of factors behind Toronto’s weak relative performance over the past decade, but the market’s structure stands right near the top of the list - i.e., a heavy weight on commodities, which have been out of favour for much of that spell, and a feather-light weight on tech, which was the pre-October market darling,” Mr. Porter said of the TSX.

“While not assigning ‘blame,’ Canada’s competitiveness position has provided little help,” he added.

“Even as marginal corporate and personal income taxes have been trending lower (or plummeting in the U.S. case) in much of the rest of the world, Canada’s have been erratically drifting upward.”

Which gives Finance Minister Bill Morneau a “prime opportunity” to “shift that trend” in his late November fiscal update, Mr. Porter said.

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Markets at a glance

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GE cuts dividend, to split power unit

General Electric’s new chief executive officer is taking aggressive steps, cutting its dividend and breaking up its power unit.

GE said today it would slash its quarterly payout to just 1 US cent from 12 US cents, allowing the company to retain US$3.9-billion a year in cash.

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It also said it would restructure its power unit, breaking it into two, one of which would ber a “unified gas business” combined with its existing gas product and services operations.

“After my first few weeks on the job, it’s clear to me that GE is a fundamentally strong company with a talented team and great technology,” CEO Lawrence Culp said in a statement.

“However, our results are far from our full potential. We will heighten our sense of urgency and increase accountability across the organization to deliver better results.”

This came as GE took a non-cash impairment hit of US$22-billion on the power business, posting a quarterly loss of almost US$23-billion or US$2.62 a share.

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What to watch for today

Markets will be watching for hints of the next Bank of Canada rate hike as governor Stephen Poloz and senior deputy Carolyn Wilkins address the Commons finance committee.

Bank of Canada senior deputy governor Carolyn Wilkins and governor Stephen Poloz

Chris Wattie/Reuters

Remember, they and their central bank colleagues raised their benchmark overnight rate to 1.75 per cent last week, and investors are now speculating whether the next move comes in December or early next year.

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And given the focus on tech stocks, investors will also be watching as Facebook Inc. reports on its latest quarter.

Facebook's reputation "has become a little tarnished as concerns over user privacy have started to become more mainstream," said CMC Markets chief analyst Michael Hewson, citing CEO Mark Zuckerberg's appointment of a former British deputy prime minster to the position of head of global communications.

That move “certainly raised a few eyebrows, but would appear to show that Facebook wants to try and get the inside track on how politics in Europe works in order to try and shape any new regulation that may be coming its way,” Mr. Hewson said.

“The shares are down over 25 per cent from their summer highs on concerns that the recent bad publicity has caused users to dial down the amount of time they spend online.”

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