Materials (Canada)
ByThe HAC fund has been well positioned in the market place to take advantage of outperforming trends in the market. The materials sector in the Canadian market has been performing well. One of the main sector holdings for HAC is XMA, iShares CDN S&P/TSX Capped Materials Index Fund. This ETF has benefi ted from strong performance in gold, fertilizer and metals and mining stocks. Approximately 60% of the fund is gold stocks, 18% fertilizer stocks and a sizeable portion of metals and mining stocks. Recently, all three of these sectors have been outperforming the market – gold has been rising and has crossed the $1,200 threshold, fertilizer stocks have done well as demand has increased for fertilizer, and the metals and mining stocks have been doing well in part as a result of the declining U.S. dollar.
Gold has its strongest seasonal strength from July 12th to October 9th. At that point it often corrects and then at the beginning of November it once again starts to rise. This year gold did not produce a gain from October 9th to October 30th. At the beginning of November once again started to increase. Gold very often will increase until approximately the end of the year, or even into February with strong momentum.
Based upon the seasonal trends it is prudent to consider lightening up on gold positions over the short to midterm. The same rational applies to XMA as it is mainly gold stocks.
