Verus Monthly Market Insights

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1 November 2017 November 2017 Modest gain for S&P/TSX Composite Index as healthcare sector sets pace for sector performance The S&P/TSX Composite Index rose 0.3% through the month of November on a priceonly basis. Of the 249 stocks in the index at month end, 121 rose and 129 fell, including the one constituent that was removed during the month. The small and mid-cap indices underperformed the broader index, while the large-cap index outperformed. A rally on the last day of the month helped the benchmark index close out a fourth consecutive monthly gain Index Returns (Price Only) November YTD S&P/TSX Composite 0.26% 5.10% S&P/TSX % 5.78% S&P/TSX Completion -0.53% 3.11% S&P/TSX Small Cap 0.19% -2.00% Top 10 Point Contributors Top 10 Point Detractors 1) Manulife Financial Corp. (+19.7) 2) Alimentation Couche-Tard Inc. (+16.3) 3) Suncor Inc. (+15.3) 1) Canadian National Railway Co. (-17.0) 2) Bank of Nova Scotia (-15.5) 3) Lundin Mining Corp. (-10.7) 4) Valeant Pharmaceuticals International Inc. (+15.0) 4) Canadian Natural Resources Ltd. (-9.9) 5) Canadian Imperial Bank of Commerce (+14.6) 6) BCE Inc. (+14.2) 7) Teck Resources Ltd. (+12.1) 8) Dollarama Inc. (+10.6) 9) Pembina Pipeline Corp. (+9.0) 10) Fairfax Financial Holdings Ltd. (+6.0) 5) Barrick Gold Corp. (-6.6) 6) Thomson Reuters Corp. (-5.9) 7) Restaurant Brands International Inc. (-5.5) 8) Open Text Corp. (-5.5) 9) Crescent Point Corp.(-4.6) 10) Saputo Inc. (-4.5) November 2017 Monthly S&P/TSX Composite Index Performance by Sector (Price only) 20.0% Healthcare 18.2% 15.0% 10.0% 5.0% 0.0% -5.0% Cons. Staples 3.7% Source: Bloomberg Telecom 2.4% Cons. Disc. 1.5% 1.0% Financials 0.3% S&P/TSX 0.3% Info. Tech. 0.2 % -0.3% Materials -0.4% -0.6% Industrials -1.5% 1 VERUS MONTHLY MARKET INSIGHTS

2 Sector Monthly price-only return Monthly total return Financials 34.94% of S&P/TSX Composite +0.29% +0.44% 19.56% of S&P/TSX Composite Materials 11.23% of S&P/TSX Composite Industrials 9.44% of S&P/TSX Composite Consumer Discretionary 5.55% of S&P/TSX Composite Telecommunications Services 4.89% of S&P/TSX Composite -0.57% -0.12% -0.43% -0.35% -1.48% -1.39% +1.52% +1.74% +2.40% +2.40% Notable Movement 13 of the 27 constituents in the Financials sub-index ended the month higher than where they began, while the other 14 were lower by month end. Manulife Financial Corp. (MFC, +4.5% price return) was the sector s largest point contributor through month end. Q3F17 core EPS beat consensus estimates, sending the shares higher early in the month. Bank of Nova Scotia (BNS, -2.1%) was the largest point detractor, the shares declining after the bank reported lower-than-expected Q4F17 EPS. Wholesale earnings were a source of weakness, declining 15% YOY. The sector saw 34 of its 50 constituents decline through the month, while only 16 rose. Canadian Natural Resources Ltd. (CNQ, -2.8%) detracted the most points from the sub-index during the month of November. Suncor Inc. (SU, +2.2%) outperformed its Canadian energy sector peers on an index point contribution basis guidance released mid-month was largely consistent with consensus and Scotiabank GBM estimates, according to the SGBM analyst. Of the Materials sector s 55 constituents at month end, 23 rose and 33 fell, including the one name removed from the sub-index. Lundin Mining Corp. (LUN, -24%) was the largest point detractor after the company issued disappointing guidance late in the month and subsequently saw its stock downgraded by multiple analysts. Teck Resources Ltd. (TECK.b, +12%) was the most significant point contributor in the sub-index after announcing a supplemental dividend of $0.40/share and a near-term share buyback commitment of $230 million under its existing normal course issuer bid. 14 of the sector s 26 constituents declined through the month, while the other 12 posted a gain for November. Canadian National Railway Co. (CNR, -3.0%) was the sector s largest point detractor after CNR s CFO warned of the possibility of a challenging Q4F17. Bombardier Inc. (BBD.b, +9.9%) added the most points to the subindex during November after reporting strong Q3F17 results and signing a letter of intent with a European customer for up to 61 (30 firm) CSeries aircraft. The Consumer Discretionary sector saw half of its 22 constituents end November in the green and the other half end the month in the red. Dollarama Inc. (DOL, +9.8%) was the sector s largest point contributor for the month of November. Restaurant Brands International Inc. (QSR, -3.9%) was the sector s biggest point laggard during the month of November. All three of the sector s constituents finished November higher than they started. BCE Inc. (BCE, +3.6%) added the most points to the subindex after reporting better-than-expected Q3F17 earnings and improving wireline subscriber trends. 2 VERUS MONTHLY MARKET INSIGHTS

3 3.83% of S&P/TSX Composite Consumer Staples 3.70% of S&P/TSX Composite Information Technology 3.28% of S&P/TSX Composite 2.89% of S&P/TSX Composite Health Care 0.70% of S&P/TSX Composite -0.29% +0.29% +3.74% +3.75% +0.17% +0.24% +1.01% +1.48% +18.2% +18.3% The sector saw 9 of its 16 constituents fall through the month of November and the other 7 rise. Just Group Inc. (JE, -22%) was the sector s biggest point laggard after reporting lower-than-expected Q2F18 revenue and EBITDA and reducing its F18 EBITDA guidance. Brookfield Infrastructure Partners LP (BIP.un, +0.9%) contributed the most points to the sub-index during the month of November. 9 of the Consumer Staples sector s 11 constituents advanced through the month, while the other 2 declined. Alimentation Couche-Tard Inc. (ATD.B, +8.8%), the sector s largest point contributor, announced better-than-expected Q2F18 adjusted EPS. Saputo Inc. (SAP, -6.0%), the sector s biggest point laggard, suffered after reporting weaker-than-expected Q2F18 EPS ($0.47 versus $0.52 consensus estimate). Sector performance for the Information Technology sector was split with 6 names climbing and 6 falling by month end. Shopify Inc. (SHOP, +5.4%) was the sector s biggest point contributor, partly recovering losses sustained in October in the wake of a report published by short-seller Citron. Open Text Corp. (OTEX, -6.7%) was the sector s biggest point detractor through November. The sector saw 17 of its 21 constituents gain ground through the month, while 4 ended the month in the red. Canadian Apartment Properties REIT (CAR.un, +8.6%) units rallied at the beginning of the month after posting in line but solid Q3F17 earnings. Brookfield Property Partners LP (BPY.un, -6.2%) removed the most points from the sub-index through November. 4 of the 6 constituents in the healthcare sub-index ended the month higher than they began. Valeant Pharmaceuticals International Inc. (VRX, +44%) was the largest point contributor through November as investors rewarded VRX for Q3F17 financial results that topped expectations. 3 VERUS MONTHLY MARKET INSIGHTS

4 November 2017 Telecoms lead the S&P 500 Index to another monthly gain The S&P 500 Index rose 2.81% on a price-only basis through the month of November. Of the 505 stocks in the index at month end, 393 rose, 112 declined and 1 remained unchanged, including the one constituent removed from the index during the month. The Dow Jones Industrial Average outperformed the S&P 500 in November, while the Russell 2000 and NASDAQ Composite indices underperformed. The S&P 500 enjoyed a wide-spread rally as all 11 sectors were higher by month end Index Returns (Price Only) November YTD S&P % 18.26% Dow Jones Industrial Average 3.83% 22.82% NASDAQ Composite 2.17% 27.70% Russell % 13.78% Top 10 Point Contributors Top 10 Point Detractors 1) Amazon.com Inc. (+3.3) 2) Qualcomm Inc. (+2.7) 3) UnitedHealth Group Inc. (+2.1) 4) Apple Inc. (+2.1) 5) Home Depot Inc. (+2.1) 6) AT&T Inc. (+2.0) 7) Cisco Systems Inc. (+1.8) 8) Wal-Mart Stores Inc. (+1.7) 9) JPMorgan Chase & Co. (+1.6) 1) General Electric Co. (-1.9) 2) Priceline Group Inc. (-1.0) 3) FacebookInc. (-0.8) 4) Oracle Corp. (-0.6) 5) Time Warner Inc. (-0.6) 6) Newell Brands Inc. (-0.5) 7) American International Group Inc. (-0.5) 8) Electronic Arts Inc. (-0.5) 9) Netflix Inc. (-0.4) 10) Verizon Communications Inc. (+1.4) 10) Applied Materials Inc. (-0.4) November 2017 Monthly S&P 500 Index Performance by Sector (Price only) 7.0% 6.0% 5.0% Telecom 5.9% Cons. Staples 5.4% Cons. Disc. 4.9% Source: Bloomberg 4.0% 3.0% Industrials 3.5% Financials 3.3% S&P % Healthcare 2.7% 2.7% 2.2% 2.0% 1.0% 1.2% Info. Tech. 0.9% Materials 0.7% 0.0% 4 VERUS MONTHLY MARKET INSIGHTS

5 Sector Information Technology 24.02% of S&P 500 Index Financials 14.75% of S&P 500 Index Health Care 14.06% of S&P 500 Index Consumer Discretionary 12.11% of S&P 500 Index Industrials 10.09% of S&P 500 Index Consumer Staples 8.11% of S&P 500 Index 5.85% of S&P 500 Index Monthly price-only return Monthly total return +0.93% +1.15% +3.28% +3.50% +2.69% +2.92% +4.90% +5.06% +3.54% +3.86% +5.40% +5.67% +1.23% +1.76% Notable Movement The sector saw 41 of its 69 constituents rise through November, while the remaining 28 fell. Qualcomm Inc. (QCOM, +30% price return) added the most points to the sub-index during November after Broadcom (AVGO) made a nearly US$105 billion offer to acquire the chipmaker. Facebook Inc. (FB, -1.6%) removed the most points from the subindex by the end of the month. Of the sector s 67 constituents at month end, 61 climbed higher while the 6 others slipped lower. The largest point contributor in the sector by month end was JPMorgan Chase & Co. (JPM, +3.9%). American International Group Inc. (AIG, -7.2%) was the largest point detractor through the month of November after reporting a deeperthan-expected loss for Q3F of the sub-index s 62 constituents rose through the month of November while the 17 others declined. UnitedHealth Group Inc. (UNH, +8.5%) was the largest point contributor through the month of November as the company issued revenue guidance for F2018 that was above consensus estimates. Detracting the most points from the sector through the month was Regeneron Pharmaceuticals Inc. (REGN, -10%) after its Eyleanesvacumab combination studies failed. The sector saw 71 of its 84 month-end constituents rise through November while 14 sold off, including the one name removed from the sub-index. Amazon.com Inc. (AMZN, +6.5%) was the sector s best-performing constituent, on an index points basis, benefitting from strong U.S. Thanksgiving long weekend sales including AMZN s single biggest shopping day ever on Cyber Monday (November 27 th ). Priceline Group Inc. (PCLN, -9.0%) weighed most significantly on the sub-index as Q4F17 profit guidance missed consensus estimates. 55 of the 68 companies in the Industrials sub-index finished in the green through the month of November, while 13 finished lower. Boeing Co. (BA, +7.3%) led the sector in point contribution during the month of November. The sector s worst performer was General Electric (GE, -9.3%). The company halved its dividend mid-way through the month as part of an ongoing overhaul of GE s board, management, and strategy. Of the Consumer Staples sector s 34 constituents, 30 ended the month higher than they started and only 4 posted a monthly decline. Adding the most points to the sub-index in November was Wal-Mart Stores Inc. (WMT, +11%) after WMT recorded its strongest quarterly U.S. sales in more than eight years. Philip Morris International Inc. (PM, -1.8%) was the sector s largest point laggard. The sector saw 19 of its 32 constituents rise through the month of November, while the other 13 ended the month in the red. Chevron Corp. (CVX, +2.7%) led the sub-index in terms of index point contribution while Kinder Morgan Inc. (KMI, -4.9%) was the biggest laggard. WTI crude oil rallied 5.6% during the month of November, breaching the US$59.00/bbl level at its peak. 5 VERUS MONTHLY MARKET INSIGHTS

6 3.15% of S&P 500 Index Materials 2.96% of S&P 500 Index 2.93% of S&P 500 Index Telecommunication Services 1.96% of S&P 500 Index +2.21% +2.75% +0.74% +0.99% +2.67% +2.97% +5.90% +6.03% Of the sector s 28 constituents, 24 rose and the remaining 4 fell through the month. Dominion Inc. (D, +3.7%) and PG&E Corp. (PCG, -6.1%) were the sector s best and worst performers, respectively. The Materials sector saw 17 of its 25 constituents end the month in the green, while the remaining 8 stocks finished the month lower than they began. Praxair Inc. (PX, +5.3%) added the most points to the sector as it pushed ahead with plans to merge with Linde AG. Monsanto Co. (MON, -2.3%) led the sector in point decline through the month of November. 28 of the 33 constituents in the sub-index moved higher through November, while only 4 ended lower and 1 remained unchanged. Simon Property Group Inc. (SPG, +4.1%) was the sector s biggest point contributor during the month of November. Essex Property Trust Inc. (ESS, -5.9%) was downgraded to Underperform from Neutral at Mizuho. According to a Bloomberg summary of the analyst s commentary accompanying the downgrade, the apartment REIT may face rent deceleration in coming quarters tied to supply pressure and slower job growth. Two of the sector s three constituents climbed through November while the only other name fell. AT&T (T, +8.1%) led the sub-index s advance despite the U.S. Department of Justice suing to block the proposed AT&T-Time Warner merger. The trial is set for March 19, VERUS MONTHLY MARKET INSIGHTS

7 Disclosures This report is provided to you for informational purposes only. The report is not intended to provide personal investment advice and does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The ScotiaMcLeod Global Portfolio Advisory Group prepared this report by aggregating information from various sources as a resource for ScotiaMcLeod Wealth Advisers and their clients. Information may be obtained from the Equity Research and Fixed Income Research departments of the Global Banking and Markets division of Scotiabank. Information may also be obtained from the Foreign Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members of the Scotiabank group, information may be obtained from the following third party sources: Standard & Poor s, Valueline, Morningstar, Bloomberg, and FactSet. The information and opinions contained in this report have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied, is made as to their accuracy or completeness. While the information provided in this report is believed to be accurate and reliable, neither Scotia Capital Inc., which includes the ScotiaMcLeod Global Portfolio Advisory Group, nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Copyright 2017 Scotia Capital Inc. 7 VERUS MONTHLY MARKET INSIGHTS