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Inside the Market The TSX’s worst performing stocks and sectors in a month investors wish they could forget

Even though the S&P/TSX Composite Index ended October on a high note with a nice rally on Wednesday, it nonetheless suffered its worst monthly decline in more than seven years.

Canada’s benchmark index for stocks fell 6.5 per cent in October, marking its biggest setback since September, 2011, and taking it back to where it was about a decade ago. All the broad sectors fell, led by economically sensitive areas of the market such as energy, consumer discretionary, financials and industrials.

Even relatively safe, dividend-generating sectors such as utilities, telecommunications and real estate investment trusts sputtered.

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Corporate profits in the third quarter have been strong in Canada and the United States, and economic growth continues to impress. But investors appear to be growing cautious about what’s coming as central banks – including the Bank of Canada – hike interest rates and show little indication of halting. Investors are also wary of rising wages and trade tariffs cutting into profit margins.

“Based on October’s global stock market rout, investor concerns are not isolated to just emerging economies any more,” Krishen Rangasamy, an economist at National Bank Financial, said in a note. “Investors seem to understand that the escalation in the U.S.-China trade war could have ripple effects across global supply chains, hurting trade volumes and hence world GDP growth in the process.”

For investors with heavy exposure to Canadian stocks, the lost month is bound to cause some fretting over the need for greater international diversification. The long-sought revamp of the North American free-trade agreement, now called the United States-Mexico-Canada Agreement, failed to ignite any optimism in Canadian stocks that depend upon trade. And legalization of recreational marijuana didn’t do any favours for Canadian cannabis stocks.

But here’s the upside: At least Canada’s stock market is in good company. The S&P 500 fell 6.9 per cent in October. And Mr. Rangasamy noted that global stocks, as represented by the MSCI All-World Index, declined 8 per cent in October, marking their worst month since 2009 and suggesting that there are few places for equity investors to hide from the turbulence.

Canada may be down, but it’s not alone.

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