February 12, 2016 – Weekly Brief

TSX Rallies on Friday, Cutting into Earlier Losses as Oil & Financials Jump

The S&P/TSX Composite finished down again this week, but rallied on Friday with a 2.4%, 293.87 point jump, to finish trading at 12,381.24. The Friday uptick was the first positive finish for the TSX in 6 days. As one might expect, this positive finish was mainly driven by increases in the financial and energy sectors; however, all 10 of the TSXs main sectors were in the black on Friday.

Oil, which hit a 12-year low earlier in the week, rebounded strongly to finish the week only slightly down. Once again, renewed optimism over the possibility of an OPEC deal with other producers to cut supply led the to the rebound. From week to week, analyst sentiment seems to be flipping between optimistic and pessimistic on the future of an OPEC agreement. West Texas Intermediate saw future contracts rise 12%.

The Loonie finished the week at 72.22 cents to the US Dollar, up 0.5% for the week. Gold has been seen all year as a safe haven, and that sentiment did not change this week; indeed, Gold increased on the week to $1238.50 per ounce, up 5.5% for the week. Gold maintained its status trend as a safe haven, as evidenced by it’s nearly 11% increase year-to-date.

In the U.S., data from Friday revealed that consumer confidence has declined in February, with stock prices and the perception of weaker global conditions being front-and-centre in consumers’ thoughts. A difficult week in the U.S. markets did nothing to bolster consumer confidence either, as all markets were down for the week.

Much of the selloff was sparked on Wednesday, as U.S. Federal Reserve Chair Janet Yellen’s Tuesday remarks to Congress indicated a potential delay in further rate hikes. Worries about a softening U.S. economy were certainly not eased by these statements, and Wednesday saw a selloff in Europe and Asia which was followed by similar such selloffs later in the day in North America.

Many banks also scared investors, as plunging rates around the world have led to fears of decreasing profitability for banks; consequently, banks in Greece, France, Italy and Germany saw their stocks decrease. Sweden Central Bank “Riksbank” also added fuel to the fire with an additional rate cut, plunging the key Swedish rate to -0.5% from -0.35%.

Falling markets continue to offer a stellar opportunity for Canadians looking to invest for the long term. By adding to their current portfolios, investors in Canada can enjoy a lowered average cost base on their overall portfolio. To be sure, low oil prices are transferring money out of the hands of oil exporters and into the hands of oil importing countries.

Inevitably, that transfer will lead to increased spending by these importing countries. Increased spending will help the economy to grow, and the ensuing market rebounds will allow today’s investments to enjoy strong growth down the line. It cannot be stressed enough how opportune the timing is of the markets declining, as the RRSP contribution deadline for the 2015 Tax Year is a little over 2 weeks away (February 29th).

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Market Update as of February 12, 2016

North America

The TSX closed at 12381, down -383 points or -3.00% over the past week. YTD the TSX is down -4.67%.

The DOW closed at 15974, down -231 points or -1.43% over the past week. YTD the DOW is down -8.33%.

The S&P closed at 1865, down -15 points or -0.80% over the past week. YTD the S&P is down -8.76%.

The Nasdaq closed at 4338, down -251 points or -0.57% over the past week. YTD the Nasdaq is down -13.36%.

Gold closed at 1239, up 56.00 points or 5.54% over the past week. YTD gold is up 17.00%.

Oil closed at 29.08, down -1.77 points or -5.74% over the past week. YTD oil is down -21.51%.

The USD/CAD closed at 1.384803, down -0.0058 points or -0.42% over the past week. YTD the USD/CAD is up 0.08%.

Europe/Asia

The MSCI closed at 1469, down -80 points or -5.16% over the past week. YTD the MSCI is down -11.67%.

The Euro Stoxx 50 closed at 2756, down -123 points or -4.27% over the past week. YTD the Euro Stoxx 50 is down -15.67%.

The FTSE closed at 5708, down -140 points or -2.39% over the past week. YTD the FTSE is down -8.55%.

The CAC closed at 3995, down -216 points or -4.90% over the past week. YTD the CAC is down -13.85%.

DAX closed at 8968, down -512.00 points or -3.42% over the past week. YTD DAX is down -16.52%.

Nikkei closed at 14953, down -1867.00 points or -11.10% over the past week. YTD Nikkei is down -21.44%.

The Shanghai closed at 2765, up 1.0000 points or 0.04% over the past week. YTD the Shanghai is down -21.87%.

Sources: Globe Advisor, Yahoo! Finance, Dynamic Funds