Shopify 70% plunge almost single-handedly dragged the TSX into the red

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Shopify Inc.’s 70 per cent plunge has almost single-handedly dragged the Canadian stock market into the red this year, taking the shine off what would otherwise be one of the world’s top-performing major equity benchmarks.

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The e-commerce software provider has lost $161 billion in market value in 2022, causing a 978-point drag on the S&P/TSX composite index. Without it, the index would be down less than two per cent in Canadian dollars this year, rather than six per cent.

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Shopify was down 0.2 per cent to $52.52 at 9:35 a.m. in Toronto on Monday. It ended last week on a six-day losing streak.

It’s not the first time a single tech stock has been a huge anchor on the key Canadian index. Nortel Networks Corp.’s collapse was a 353-point drag in 2001, the index’s inaugural year. BlackBerry Ltd., then called Research in Motion Ltd., was the S&P/TSX composite’s biggest negative contributor in 2008, pulling the index down more than 300 points.

Despite Shopify, Canadian stocks have outperformed the S&P 500 Index by more than 11 percentage points this year. Unlike some equity gauges in Europe and the United States, the S&P/TSX composite did not enter an official bear market this year: its peak-to-trough decline was 17.6 per cent.

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For longer-term holders of index funds, Shopify has had a less meaningful impact. The stock has had almost no influence on the benchmark over a three-year period, as this year’s losses have essentially given back two years of big gains. The S&P/TSX composite is up 17.7 per cent over three years, with banks, commodities and railways having the biggest upside impact.

Some investors see the S&P/TSX composite outpacing the S&P 500 as long as higher rates continue to pressure technology shares.

“With Shopify being a smaller component, there’ll be more room to continue to outperform as long as we’re in a tightening cycle with rising interest rates,” Martin Pelletier, senior portfolio manager at TriVest Wealth Counsel Ltd., said

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