Yes. You read me well. Recovery…I am almost afraid to say the word.
If you have been following markets movements these past few days, you are likely pleased but also surprised to see that markets around the globe are sharply up from their lowest lows. In fact, today March 31 ended the best month for the Dow i n years. Up 8% this month. Here is a snap shot of the recent equity markets movements:
From March 9 lowest point to today March 31
TSX (Canada) +15.3%
Dow (USA) +16.2%
S+P 500 (USA) +18.1%
Hang Seng (China) +23.3%
FTSE (London) +11.2%
DAX (Germany) +11.4%
These are pretty big numbers in 3 weeks. Why is this happening and will it last? Well, these are big questions but I think it is fair to say that the new data we are getting daily is a lot more positive than it was a few weeks ago. Banks are showing profits, yes profits, can you believe that? The Real estate market in the US is picking up, consumer confidence is slightly up and companies are starting to invest in a big way making large acquisitions. These are leading indicators which show that the economy is gaining progress. We are far from out of the woods but there are clear signs that it is the early beginning of a recovery.
In the past month, the biggest movers were:
Financial services: with dividend yields of 6% to 7% and drops of 30% to 50% last year, it is no surprise this sector is one of the biggest mover these days. This is an excellent sector to buy right now. Every portfolio should hold 20% or more in this sector for regular income and participation in the sector recovery. Canadian banks present the “safer” bet.
Energy sectors: the price of a barrel of oil went from $150 to less than $50. Analysts forecast the price of oil to go to over $200 a barrel within 3 years. It is a pure case of supply and demand. Natural gas too is well positioned. This one is a no brainer. Add exposure up to 15%.
Emerging markets & Asia in general: Emerging markets, Asia and especially BRIC countries (Brazil, Russia, India, and China) are up sharply up to 10% in one month. These are areas of the world where consumerism on the rise. They will likely ignite the recovery and carry us to the next level of global growth. Everyone should have some exposure, more if you are younger and less if you are in the later part of your life or very risk adverse.
We have been repositioning client portfolios to take advantage of these new developments. Please make sure to come in for your annual review and get your portfolio adjusted to participate in the recovery.