Canadian stocks celebrated the new year by plunging into a bear market.
While investors flee the resource sector, there is growing concern that financials might be next up on the market's chopping block.
As uncertainty abounds it's time to test your stock-picking prowess in my third annual big bank stock contest. All you have to do is figure out the best, and the worst, of the Big Six Canadian banks to invest in this year.
Just like last year, your fantasy portfolio starts with $60,000 split equally between Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Toronto-Dominion Bank and Royal Bank of Canada. You have to pick one of the banks to sell and another to buy. The fantasy portfolio is then set for the year and begins its run at the end of January with $20,000 in your favourite stock, nothing in the one you dislike, and $10,000 in each of the remaining four.
Looking back at last year's results, an equally weighted portfolio of the six banks provided a total return of 4.6 per cent from the end of January to the end of December.
The top performer was Bank of Montreal, which climbed 10.5 per cent but TD Bank was close behind with a gain of 10.3 per cent. CIBC climbed 8.4 per cent and RBC advanced 6.5 per cent. At the bottom of the heap, Bank of Nova Scotia lost 4.0 per cent and National Bank trailed with a decline of 4.4 per cent.
While you might think those returns aren't much to write home about, all of the banks beat the resource-heavy S&P/TSX composite index, which fell 8.8 per cent over the same period.
Unfortunately, last year's stock pickers weren't entirely successful.
Their fantasy portfolios gained an average of 4.4 per cent over the last 11 months of 2015 and lagged the equally weighted portfolio of bank stocks by 0.2 of a percentage point.
Just 4 per cent of the contestants correctly picked Bank of Montreal as the winner for 2015. (The bank also happened to be the winner in 2014.)
A more sizable 16 per cent rightly pointed to National Bank as the laggard.
The one person who was right on both counts saw their fantasy portfolio gain 7.0 per cent.
On the downside, three people got it exactly wrong when they decided to sell Bank of Montreal and buy National Bank.
Their portfolios gained 2.1 per cent.
I can't help but observe that taking a purely random approach would have likely yielded better results.
It demonstrates how difficult it is to be a successful stock picker. It's also a big reason why many people give up and buy all of the banks. I own half of them myself.
On a more positive note, the banks provide generous dividend yields these days. They range between TD Bank's 4 per cent and National Bank's 5.8 per cent.
That's pretty good provided they don't fail in some unrecoverable way.
Undaunted by past results, I'm pleased to run the contest again.
The goal is to figure out the big Canadian bank to sell and the one to buy.
To enter the contest, put your answer in the comments section of this article.
The person with the fantasy bank portfolio that gains the most in the last 11 months of 2016 will be sent a modest reward in 2017. (If there is a tie, the winner will be determined by random draw.)
But you have to get your selection in before the end of January to be eligible, and, please, only one entry per person.
Test your stock picking skills and weigh up the banks' prospects today.
Norman Rothery is the value investor for Strategy Lab. Globe Unlimited subscribers can read more in the series at tgam.ca/strategy-lab.