A Strong Start Eclipsed By Volatile Politics and Economics

Global markets started the year on a solid footing. Strong economic data and corporate earnings as well as an optimistic outlook from Europe that policy makers would take steps necessary to manage the sovereign debt crisis pushed markets higher early in the year.  As the year progressed, however, equities became increasingly volatile as a number of global events affected markets.  Political unrest in the Middle  East and North Africa, Japan’s earthquake, mounting sovereign debt problems in Europe and the prospect of another recession in the United States all contributed to significant uncertainty as far as markets were concerned.

Canadian stocks underperformed U.S. equities in 2011 for the first time in eight years as the European debt crisis and slowing growth in developing markets pushed down commodity stocks.  The TSX’s heavy weighting in  financials, energy and materials  (+75 per cent of the Index) generally produces positive returns when both the global economy and demand for commodities is soaring but drags TSX performance down in the volatile economic climate experienced last year.

TSX Down 11.1% On The Year

The S&P/TSX was down 11.1% for  the year.  The eleven individual TSX  Capped Sector Indexes were almost split evenly in reporting positive and  negative returns:

TSX Capped Sector Indexes *

* Source – Globe and Mail –  December 31, 2011; relative weights of individual constituents are capped at  25% by market capitalization

As the chart above illustrates, it was not just financials and commodities that helped pull the Canadian index into negative  territory.  One of the worst performers  was information technology where the decline in Research in  Motion’s value brought down the Tech Index.

The predominant global market indexes also showed mostly  negative returns for 2011:

Source – Fidelity Investments
– Year in review – 2011

Some Late Blooming Brightspots?

While the S&P 500 was flat for the year (remaining basically unchanged), fuelled by positive returns from 20 (including McDonald’s, IBM and Pfizer) of the Index’s 30 constituents, the Dow Jones industrial average saw a surprising gain (5.5%) for the third year in a row.

Not forgetting the fixed income (bond) markets, the DEX  Universe Bond index reported a 9.7% return for 2011.  The economic concerns that weighed heavily  on the equity markets led investors to seek the relative safety of bonds, in particular,  government bonds.  Canadian bonds posted  strong returns for the year with federal issues outperforming corporate ones.

2012: What’s the Outlook? 

Given the continued strong market uncertainties associated with unforeseen events and circumstances, any  pronouncements would be rather speculative.

Although there are some indicators that European and U.S. economies are  settling, there are mixed views on future global and regional growth and the associated levels of market volatility.  Staying  the course and remaining diligent will continue to be important in 2012.

Have a safe and prosperous 2012.

Waterloo Region’s Healthy Workplace Awards Program recognizes and celebrates workplaces in Waterloo Region who demonstrate a strong commitment to improved health for their employees.

Waterloo Region’s Healthy Workplace Awards Program and its Project Health initiative honour businesses whose commitment to workplace wellness supports Public Health values and standards.

Project Health is an initiative that provides a variety of health promotion services to workplaces interested in improving and/or sustaining a healthy workplace in Waterloo Region. Promoting health in the workplace doesn’t have to be complicated, expensive or time consuming. It’s a matter of making a commitment to workplace health, finding out what kinds of initiatives employees want, developing a plan, and putting activities in place.

The workplace can have a significant impact on employee health, especially when you consider that most people spend over half of their waking hours on the job. Increasing evidence shows that the work people do and their work environments affect health, and that employers can play a significant role in improving the health of their employees.

Workplace wellness programs are an investment in the long-term health and wealth of employees. The benefits of a well planned and well-executed wellness program include both qualitative and quantitative benefits to business:

• Increased productivity
• Increased employee morale
• Reduced absenteeism
• Reduced injuries and/or illness
• Reduced employee turnover
• Improved job satisfaction
• Improved company image

CBA is a leader in both the implementation of a wellness program for its own employees, as well as the design, implementation and ongoing management of wellness programs for its clients.

To learn more about healthy workplaces, contact CBA at 519.579.7749.

Every benefits plan has two buckets of expenses – one bucket is the cost of the health services and products provided to your employees. The other bucket is for the administrative costs involved with everything from designing your overall plan to paying and processing claims for the right services at the right rates. Both of these buckets come together to form your premiums.

A quick metric is to look at your “Target Loss Ratio” (TLR). In simple terms, TLR shows how much of your benefit premiums are going to cover the actual cost of your benefits and how much is going to administer your plan. The closer your TLR is to 100, the more efficient your benefits plan.

Controlling or reducing the administrative bucket of costs gives you the opportunity to put more of the money you invest toward actual benefits for your employees and it’s the most effective way to improve the ROI on your investment in your benefit plan.

There is a common perception that offering benefits is too expensive for small businesses. The fact is an employer cannot afford not to offer employee benefits coverage. If you don’t, your competitor will.

It’s clear that, despite the rising cost of benefit plans, they remain critical in attracting and retaining talent. The challenge for employers then becomes understanding the return on their investment in employee benefits. It’s not about spending less money, it’s about spending the right amount of money.