After three years of growth, the fall of the stock markets in 2022 was not so surprising. What was more difficult was the sharp decline in fixed income, so it was very difficult for investors to keep their portfolios from losing feathers.
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“Usually bonds act a bit like a safe haven. But not this time. It’s been a very difficult year for returns,” said Lorenzo Tessier-Moreau, economist at Desjardins Group.
The flagship index in the United States, the S
“We haven’t seen such a uniform decline since the 1970s at least. The typical portfolio of 60% stocks and 40% bonds is down about 12%, which is significant. The tightening of monetary policy has led to a downward review of the prices of all asset classes, ”coldly summarize the economists of the Bank of Montreal.
Fall of tech
Rising interest rates in an effort to rein in high inflation has hurt technology stocks especially. In the United States, the Nasdaq plummeted nearly 35%. In Canada, the information technology sub-index plunged more than 30%, led by the tumble of Ontario giant Shopify (-70%).
In an uncertain economic environment where financing costs were surging, investors fled the stocks of indebted and unprofitable companies, such as Uber and WeWork.
That said, even the web giants have tasted the gloom in the markets. Alphabet (Google), Amazon, Apple, Meta (Facebook) and Microsoft alone have collectively lost over US$3.5 trillion in value in 2022.
As if that were not enough, the war in Ukraine also contributed to dragging global stock markets down, particularly on the Old Continent, where the Euro Stoxx 50 index fell by more than 11%.
Soaring crude
The conflict, however, drove up oil prices, which hovered above US$100 a barrel for much of the year. This spike in energy prices boosted profits and the stock price of hydrocarbon operators, which helped the Toronto Stock Exchange avoid too steep a fall.
That said, the virtual absence of the hydrocarbon industry in Quebec has not prevented the index of the 30 largest companies listed here on the stock exchange from doing better than the TSX. The IQ-30 is on track to end the year with a meager drop of 3.6%.
“The Quebec index benefited in particular from the positive contribution of the non-cyclical consumer sector [essential goods] while not being exposed to the decline in the real estate sector,” explains Mr. Tessier-Moreau.
QUEBEC ENTERPRISES INC. IN TROUBLED WATERS
The year 2022 will have been particularly difficult on the stock market for many Quebec companies which, until recently, attracted attention for their promises of prosperity. This is notably the case of the cryptocurrency mining company Bitfarms (-90.7%) and the cannabis producer HEXO (-88.7%). The same is true for Goodfood, GURU and Loop Industries, which saw their stock values plunge by more than 80% in 2022. Vehicle manufacturer Lion Electric (-78.8%), retailer DAVIDsTEA (- 77.4%) and tech Dialogue (-68.9%), Lightspeed (-62.5%), Nuvei (-57.3%) and Coveo (-53.5%) also had a tough year .
LOCAL COMPANIES CLIMB, DESPITE THE TURMOIL
Other Quebec companies have managed to resist the headwinds that 2022 has brought rather well. Uni-Select, an auto parts distributor, is the big winner of the year. In the midst of a car shortage, the company saw its value grow by 67.9%. In a completely different area, shareholders of Resolute Forest Products were able to benefit from the sale of the company to Paper Excellence, which is foreign-owned. Valued at approximately $3.5 billion, the transaction helped Resolute’s stock jump 55.8%. Finally, at the heart of the inflationary storm, the ADF Group (which specializes in the manufacture of steel structures) and the retailer Dollarama managed to raise their stock price by more than 25%.
AN AVERAGE PERFORMANCE OF THE QUEBEC 30 INDEX
As of December 20, the 30 major market capitalizations in Quebec (IQ-30) produced a negative return of -3.8% in 2022. They are doing better than those in British Columbia (ICB-20) and Atlantic Provinces (IA-15), which posted declines of -5.4% and -17.1% respectively. On the other hand, Ontario (IO-40) and the Prairies (IP-10) recorded returns of 1.1% and -1.5%. Alberta, whose economy is dominated by the exploitation of hydrocarbons, is in a class of its own: its index (IAB-25) posted a return of… 17.9%.
DROP IN IPOs
As elsewhere in the world, the Toronto Stock Exchange (TSX) and the TSX Venture Exchange (TSXV) will have welcomed far fewer newcomers in 2022 than last year. As of November 30, 111 companies and funds have listed their securities on the TSX and TSXV – down 45.6% from a year ago. As for the number of initial public offerings (IPOs), it was only 17, or 66% less than the record of 50 reached in 2021. Of the number, three took place at the TSX and 14 at TSXV. Of the lot, Valeo Pharma is the only Quebec company.
APRIL 5:
▸ The S index
JUNE 13:
▸ Bombardier consolidates its shares at a rate of 25 for one, which has the effect of increasing its stock price from $1.13 to… $26.86! The Quebec multinational thus wishes to increase investor interest in its shares. Bombardier stock is on track to end the year with a jump of almost 20%.
SEPTEMBER 13:
▸ The American S index
OCTOBER 3:
▸ Terrebonne-based Loop Industries shares fall more than 10% on the Nasdaq after a US stock market lawsuit is filed alleging that a major Loop shareholder defrauded a wealthy senior by hiding his real identity. The founder of Loop, Daniel Solomita, assured that he had nothing to do with this fraud.
DECEMBER 3, 2022:
▸ The action of Montreal’s Goodfood Market is experiencing a spectacular rebound of 39% on the stock market after the announcement of an improvement in its profit margins. The meal preparation company, however, remains in a very difficult position: its sales having suffered greatly from the end of the containment measures, its stock price fell from a high of $13 in January 2021 to a low of 26 cents in november.
DECEMBER 22:
▸ Le Journal reveals that the Ministry of the Economy, headed by the very influential Minister Pierre Fitzgibbon, secretly purchased $49 million worth of securities from the Quebec company Lightspeed Commerce. Unusually, this share purchase was made last July on the stock markets. The ins and outs of this transaction remain mysterious. It is, however, possible that the Quebec government wanted to stop the tumble in Lightspeed’s stock.
