Monthly Archives: June 2016
Start building your courage, we are in for a ride ahead of the June 23rd referendum date in the United Kingdom, when British citizens will vote on whether or not to remain part of the European Union. You can expect the markets to move downward a few percentage points leading to the vote, with polls indicating that the race is tight, and a deeper dip if the British vote in favour of leaving the EU.
Should you be spooked by the Brexit Boogeyman? Should we be taking some actions now to mitigate this risk?
The June 23rd referendum clearly represents uncertainty for markets, businesses and the central bank. Independent economists say a vote to leave the EU could cause a drop in the pound of as much as 20% and push the economy back into recession.
Manulife Asset Management’s Chief Economist, Megan Greene believes that the UK’s best and most likely path forward is to remain in the EU. “By doing so, it can try to reform the EU from within”. She explains why the alternatives to EU membership would all leave the UK less well-off and how a Brexit could potentially lead to a weaker pound sterling as well as looser monetary policies from the Bank of England. Interestingly, Ms Greene also notes that “…while Brexit may not be in the UK’s best interest, it might not be the unmitigated disaster that some fear”.
If Brexit occurs, the UK will negotiate some agreement that is mutually beneficial for the UK and the EU. An agreement will be eventually reached, potentially, similar to the successful agreements with Sweden and Norway.
For investments however, the best buying opportunities come from trading against an emotional crowd. “This may be a buyable dip for those who have the courage to be greedy when others are fearful. A week of two after the Brexit vote, the unknowns will have been ironed out and we will move forward with a plan.” Says Jani Ziedins from Cracked Market.
Capital Economics has been commissioned by Woodford Investment Management to examine the United Kingdom’s relationship with Europe and the impact of ‘Brexit’ on the British economy.
The in-depth analysis concluded that “although the impact of Brexit on the British economy is uncertain, we doubt that Britain’s long-term economic outlook hinges on it.”
Here is the full 47 pages report which covers the economic impacts of the most important elements of the Brexit debate.
Don’t let this uncertainty rattle your long-term focus. Remain rational and avoid making risky bets. Staying the course with your current long-term quality investments – within a balanced portfolio – is always the safest course of action.
If you are in your saving years and have funds to invest, this dip may prove to be a great opportunity to enhance your returns.
“It’s Hard To Be Humble When You’re As Great As I Am” -Muhammad Ali
TSX Falls On Friday
The Toronto Stock Exchange saw a triple-digit loss on its last trading day of the week in a decline led by energy companies as the benchmark price for crude slipped. The S&P/TSX composite index was down 202.48 points Friday at 14,037.54, led by the energy sector, which was down 3.8%. The metals and mining sector of the TSX slipped 3.29% and base metals stocks declined 3.02%. The Canadian dollar lost 0.27 of a U.S. cent to 78.39 cents US. That’s despite the fact that Statistics Canada reported that the economy gained 13,800 jobs in May, pushing the jobless rate down to 6.9%, its lowest level since last July.
In New York, markets were also down as uncertainty around global economic risks weighed on investors’ minds. The Dow Jones industrial average was down 119.85 points at 17,865.34, the broader S&P 500 composite index slid 19.41 points to 2,096.07 and the Nasdaq composite fell 64.07 points to 4,894.55. Some of the key risks that have traders worried include the upcoming referendum on June 23 that will determine whether the United Kingdom will exit the European Union, as well as uncertainty relating to June meetings of the U.S. Federal Reserve and the Bank of Japan..
Canadian Baby Boomers To Inherit $750 Billion In Next Decade
Canadian baby boomers will inherit an estimated $750 billion in the next decade, according to a new CIBC Capital Markets report. It will mark the country’s largest-ever wealth transfer and is expected to alter the retirement landscape. There are currently more than 2.5 million people over the age of 75 in Canada, about 45% of whom are widowed, according to the report. That’s a 25% spike from the level seen 10 years ago.
According to the report, just over half of Canadians between 50 and 75 have received an inheritance. Of those, half received it within the past decade. The average inheritance was $180,000, with British Columbia leading the way in the amount of the average bequest. More money is going to people already in higher income brackets, the report found; Canadians who earn more than $100,000 inherited almost three times more on average than lower-income Canadians. Those with higher education levels also received more. About 40% of higher-income Canadians saved or invested their inheritance, while lower-income people tended to use the money for daily expenses, the report found.
Weekly Market Wrap Up as of June 10 2016
The TSX closed at 14038, down -189 points or -1.33% over the past week. YTD the TSX is up 8.08%.
The DOW closed at 17865, up 58 points or 0.33% over the past week. YTD the DOW is up 2.53%.
The S&P closed at 2096, down -3 points or -0.14% over the past week. YTD the S&P is up 2.54%.
The Nasdaq closed at 4895, down -48 points or -0.97% over the past week. YTD the Nasdaq is down -2.24%.
Gold closed at 1277, up 28.00 points or 2.90% over the past week. YTD gold is up 20.59%.
Oil closed at 48.95, up 0.33 points or 0.68% over the past week. YTD oil is up 32.12%.
The USD/CAD closed at 1.277878, down -0.0168 points or -1.30% over the past week. YTD the USD/CAD is down -7.64%.
The MSCI closed at 1689, up 10 points or 0.60% over the past week. YTD the MSCI is up 1.56%.
The Euro Stoxx 50 closed at 2911, down -87 points or -2.90% over the past week. YTD the Euro Stoxx 50 is down -10.92%.
The FTSE closed at 6116, down -94 points or -1.51% over the past week. YTD the FTSE is down -2.02%.
The CAC closed at 4307, down -115 points or -2.60% over the past week. YTD the CAC is down -7.12%.
DAX closed at 9835, down -268.00 points or -2.65% over the past week. YTD DAX is down -8.45%.
Nikkei closed at 16601, down -41.00 points or -0.25% over the past week. YTD Nikkei is down -12.78%.
The Shanghai closed at 2927, down -12.0000 points or -0.41% over the past week. YTD the Shanghai is down -17.29%.
Sources: Bloomberg; Investment Executive; CIBC; advisor.ca,
“It Was June and The World Smelled of Roses” -Maud Hart Lovelace
TSX Enters Bull Market Territory
The Toronto stock market entered bull market territory Friday June 3, rising more than 20% over its lowest close in 2016 to date. The S&P/TSX composite index gained 89.79 points at 14,226.78, a 20.1% jump from its Jan. 20 close of 11,843.11. The loonie rose 0.95 of a U.S. cent to 77.26 cents US as the greenback faded against most major currencies following a disappointing American jobs report. U.S. markets closed in the red as investors grappled with the lower than expected jobs numbers for May. The lower-than-expected labour figures were good news for gold prices though as investors bet on the Fed delaying a rise in interest rates.
The Dow Jones industrial average was down 31.50 points at 17,807.06, while the broader S&P 500 lost 6.13 points to 2,099.13 and the Nasdaq stepped back 28.84 points to 4,942.52. In commodities, the August contract for gold rose US$30.30 to US$1,242.90 a troy ounce, the July contract for benchmark North American oil fell 55 cents to US$48.62 a barrel, while July natural gas fell 0.7 cents at US$2.398 per mmBTU.
Clients More Reliant On Financial Advisors, Surveys Find
The Canadian Securities Administrators’ (CSA) 2016 edition of its investor education survey found that a growing number of Canadians are relying on advisors, with 56% reporting that they utilize an advisor, up from 43% in 2006 when the CSA first carried out the survey. Moreover, investors cited advisors as their primary source of investing information and credited their advisors as the reason for reassessing their risk tolerance in the past year. The CSA survey found that 61% reviewed their level of risk tolerance during the year, up from 49% in 2012.
In addition, a survey from France-based Natixis Global Asset Management has also found that advice is the most important factor driving Canadian investors’ financial decisions, as 43% cited advice vs 21% who credited online research. The Natixis survey also found that investors generally value that advice, with 63% saying that those with advisors are more likely to reach their financial goals and 62% saying that advice is worth the cost.
The CSA survey was carried out by Innovative Research Group, which polled 4,298 Canadian adults online from Feb. 10-20. The Natixis survey was part of a larger global study of more than 7,100 investors in 21 countries. The Canadian component canvassed 300 individual investors with a minimum of $258,000 (US$200,000) in investable assets. It was also carried out online in February.
Sources: Bloomberg; Investment Executive; advisor.ca,