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A TSX tote board is pictured in Toronto, on Dec. 31, 2012. The S&P/TSX composite index is down by 12.6 per cent so far in 2015, setting the benchmark up for its biggest loss since 2008.Frank Gunn/The Canadian Press

Jim Hall can claim something of a victory this year, but even he acknowledges there weren't really any winners in Canadian stock investing.

Mr. Hall is chairman of Mawer Investment Management and two of the firm's Canadian-focused mutual funds are alone among the 50 largest Canadian equity funds that have a positive return this year. And the returns? Just 0.3 per cent and 0.2 per cent, respectively.

"Even with good securities selection and being defensively positioned, that's the best we could do," Mr. Hall said. "It's not exactly shooting the lights out."

The global commodity sell-off has once again exposed Canada's dependence on resources. With crude oil testing lows not seen since early 2009, the loonie has sunk to its lowest level in more than a decade, and Canadian stocks are on course for their worst year since the financial crisis.

"It's underperforming just about every market globally," said Jeffrey Morrison, a portfolio manager at MFS Investment Management. "There is a challenging outlook for earnings for the TSX versus all the other major global markets."

Investing in Canada has, and will likely continue to be, a distinctly unrewarding experience. The list of grievances is long. And there's no better opportunity than the end of the year to reflect on past failures and to anticipate disappointments the stock market has in store. Canada, how do we hate thee? Let us count the ways.

The S&P/TSX composite index is down by 12.6 per cent so far this year, setting the benchmark up for its biggest loss since 2008. There are only a handful of sizable markets doing worse than Canada – Colombia, Peru, Indonesia and Singapore. Not much else.

The main Canadian benchmark is now flat over roughly the past two years. Also, over the past four years. And five years, and seven years, and nine years.

The pressure on the Canadian market over 2015, of course, was largely a result of the global downturn in commodity prices.

The great expansion that has given rise to the world's leading emerging-market economies, primarily China, has begun to falter. Chinese growth has sustained Canadian resource stocks for years. Now that global demand for commodities has softened, excessive supply has put downward pressure on everything from oil to aluminum.

The close link between Canadian equities and the fates of the developing world is illustrated by how closely the composite tends to track the MSCI Emerging Markets index. Since the stock market bottomed out in early 2009, the correlation coefficient between the two indexes is about 0.8, according to Bloomberg, where 1 represents the strongest possible direct relationship.

"You can run, but you can't hide," Mr. Hall said. "Indirectly, commodities are probably 80 per cent of the market. The banks themselves are commodity related. Many mortgage loans are to people who work in commodity companies."

The global energy market is approaching the end of the year in a nosedive, after the Organization of Petroleum Exporting Countries removed its production cap, adding new potential supply to the global glut. The International Energy Agency said this week that there is little chance of an energy recovery in 2016.

On Friday, West Texas intermediate fell below $36 (U.S.) a barrel for the first time since early 2009. Bank of Montreal chief economist Douglas Porter said he sees the latest downdraft in oil as an "ugly omen" for the Canadian economy next year.

The damage to the domestic energy space has already been well distributed, with even the strongest in the oil patch under pressure. So it's little surprise that the energy sector is the worst performer on the TSX composite, having declined 29 per cent year to date. Materials stocks haven't fared much better this year, having posted a year-to-date drop of 21 per cent.

Outside of resources, the pockets of strength that have helped to mitigate losses in the composite are also starting to look vulnerable going into next year.

Consumer stocks are among the best performers on the TSX in 2015. The consumer staples sector has risen 9.6 per cent so far this year. The only other sector comfortably in the black is information technology, which accounts for a mere 3.1 per cent of the index.

Stocks such as Dollarama Inc., which has risen 32 per cent this year, and Alimentation Couche-Tard Inc., which is up 26 per cent, have supported the beleaguered Canadian benchmark.

But the Canadian consumer is starting to look stretched, said Craig Fehr, an investment strategist at Edward Jones. "With high debt levels, choppy job growth, slow wage growth and a softening housing market, there are going to be headwinds for consumers."

This week, Dollarama warned that a low Canadian dollar will have a rising impact on company profitability. Most of Dollarama's expenses are in U.S. dollars, against which the loonie sunk to lower than the 73-cent (U.S.) mark for the first time since 2004.

Plus, valuations on some Canadian consumer stocks have risen along with their recent popularity. The staples sector is trading at about 18 times earnings, versus the long-term average of 15 times, Mr. Morrison said. "Sure, they have superior growth expectations, but you're certainly paying for it."

Analysts have even begun to doubt the growth outlook for Canada's big banks.

The sell-off in Canadian stocks, however, has not gone far enough to account for earnings pressures, Mr. Morrison said. "Valuations metrics, despite the low-growth outlook, aren't low enough yet to be attractive."

The advice for Canadian investors would be, for starters, to have a healthy portion of their equity exposure made up of non-Canadian stocks.

Home bias persists, with about 60 per cent of Canadian equity portfolios dedicated to domestic stocks, Vanguard reported in March. Canadian investors have been slowly diversifying geographically, however. And that trend seems to be accelerating with Canadian Imperial Bank of Commerce reporting a $5-billion (Canadian) outflow from Canadian-oriented funds so far this year.

"[With] the economy suffering under the weight of tumbling resource prices and anemic global demand, we don't blame Canadian investors who sought solace abroad," CIBC economist Nick Exarhos said in a note.

But for that portion of the average portfolio that remains in domestic stocks, now is no time to rely on a passive index approach, Mr. Fehr said, calling the composite a "terrible role model for diversification."

"You can't take a broad-based approach in this kind of market, you have to be really selective. You have to pick the quality names that have been caught in this Canadian downdraft."

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