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Monthly Archives: October 2017

Frank Mueller

Weekly Update – October 20, 2017

“I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money” – Arthur Godfrey

TSX Rises for 6th Straight Week

The Toronto Stock Exchange’s S&P/TSX composite index rose by 39.22 points (0.25%) on the day to close at 15,857.22. This represents a gain of 50.05 points (0.50%) over last week’s 15,728.32 finish.

Gains came from across the board, as 9 of the 10 major Index Sectors posted gains.

Brent crude jumped nearly a dollar per barrel to settle at $57.17 (USD) per barrel, as post-hurricane inflation continued to rise.

The Loonie was roughly even for the week, until the U.S. Senate passed their budget resolution on Thursday. On Friday, the CAD dropped by 82 basis points (1.09%) to finish at 79.22 cents USD as the Greenback surged in reaction to the budget resolution.

U.S. Markets Rise on Tax Cut Optimism, Encouraging Q3 Earnings Reports

On Thursday the U.S. Senate passed a budget resolution that raised optimism President Trump will be able to get his tax-cut blueprint put into effect. On Friday, the major U.S. Indices were up on this optimism.

The Dow Jones Industrial Average (DJIA) spiked 165.32 points (0.71%) to finish at 23,328.36. For the week, the DJIA was up a full 2%. Like the TSX, the DJIA advanced for the 6th straight week.

The S&P 500 was up 13.07 points (0.51%) to close 2,575.17. For the week, the S&P 500 was up 0.86%.

The NASDAQ jumped 23.99 points (0.36%) on Friday to end the week up 0.35% at 6,629.05. The NASDAQ has now posted gains 4 weeks running.

Consumer confidence, as well as strong Q3 earnings calls thus far – 70% of S&P 500 companies so far have posted Q3 earnings that beat street expectations – means continued positive movement is expected, say analysts.

Q3 earnings, overall investor optimism, and the budget resolution passing all worked to put downward pressure on Gold (a classic safe-haven asset). Gold dropped by $8.20 USD per ounce on Friday to finish at $1,281.80. This represents a loss of $24.30 (1.86%) USD per ounce compared to last Friday’s finish of $1,306.10 per ounce.

OSFI Makes Uninsured Mortgage Stress Test Official

As first mentioned on our Weekly Update for July 28, 2017, the OFSI made the Uninsured Mortgage Stress Test official this week. The changes take effect January 1, 2018 (looks like we nailed the date on this one!).

You can read our original post on the subject here.

The biggest change to the original proposals is the stress test rate to be applied. Originally, the stress test rate was proposed to be the mortgage rate the borrower had access to, plus 200 basis points (2%). So, a rate of 2.50% would result in a stress test qualifying rate at 4.50%.

However, the final stress test calculation is measured as the greater of the lender’s rate + 200 basis points OR the Bank of Canada’s Posted Five Year Fixed Rate, currently 4.89%.

So, the minimum stress test rate will therefore be 4.89% (if rates are unchanged from today until January 1, 2018), and will be higher if bank’s increase their lending rates.

WEEKLY MARKET WRAP-UP

North America
The TSX closed at 15,857, up 50 points or 0.32% over the past week. YTD the TSX is up 3.80%.
The DOW closed at 23,329, up 457 points or 2.00% over the past week. YTD the DOW is up 18.04%.
The S&P closed at 2,575, up 22 points or 0.86% over the past week. YTD the S&P is up 15.01%.
The Nasdaq closed at 6,629, up 23 points or 0.35% over the past week. YTD the Nasdaq is up 23.15%.
Gold closed at 1,282, down 29.00 points or 1.84% over the past week. YTD gold is up 12.65%.
Oil closed at 51.66, up 0.24 points or 0.47% over the past week. YTD oil is down 1.07%.
The USD/CAD closed at 0.79, down 0.0100 points or 1.25% over the past week. YTD the USD/CAD is up 6.48%.

Europe/Asia
The MSCI closed at 2,033, up 9 points or 0.44% over the past week. YTD the MSCI is up 15.97%.
The Euro Stoxx 50 closed at 3,605, changed 0 points or 0.00% over the past week. YTD the Euro Stoxx 50 is up 9.54%.
The FTSE closed at 7,523, down 12 points or 0.16% over the past week. YTD the FTSE is up 5.32%.
The CAC closed at 5,372, up 20 points or 0.37% over the past week. YTD the CAC is up 10.49%.
DAX closed at 12,991, down 1.00 points or 0.01% over the past week. YTD DAX is up 13.15%.
Nikkei closed at 21,458, up 303.00 points or 1.43% over the past week. YTD Nikkei is up 12.26%.
The Shanghai closed at 3,379, down 12.0000 points or 0.35% over the past week. YTD the Shanghai is up 8.86%.

Fixed Income
The 10-Yr Bond closed at 2.38, up 0.1000 points or 4.39% over the past week. YTD the 10-Yr Bond is down 2.86%.

Sources: Globe Advisor, Yahoo! Finance, Dynamic Funds

Frank Mueller

Weekly Update – October 13, 2017

“Try not to become a (wo)man of success. Rather become a (wo)man of value” – Albert Einstein

TSX Hits 7-1/2-Month High on Rising Commodity Prices

The Toronto Stock Exchange’s S&P/TSX composite index rose by 64.97 points (0.41%) on the day to close at 15,807.17. This represents a gain of 78.85 points (0.50%) over last week’s 15,728.32 finish.

Gains were driven primarily by commodities & resources, with helpful assists from telecoms & financials.

Gold rose by about $20 USD per ounce week-over-week, boosted by a Friday gain of $9.60 per ounce, to finish the week at $1,306.10 per ounce.

Encouraging Chinese import data, as well as tensions in the Middle East – and President Trump’s ominous tones regarding the Iran Nuclear Deal – all played a part in driving oil prices. Brent crude jumped nearly a dollar per barrel to settle at $57.17 (USD) per barrel.

The Loonie rose 27 basis-points for the week, rising from an even 80 cents (USD) to 80.27 cents.

NASDAQ Hits Another Record High; S&P 500 and Dow Jones Industrial Average All Gain on the Week

NASDAQ struck another record high on Friday, as technology sector shares experienced healthy gains. Settling at 6,605.80, the NASDAQ saw a weekly increase of 0.24%.

The S&P 500 and the Dow Jones Industrial Average also enjoyed gains week-over-week, with 0.15% and 0.43% jumps, respectively. The S&P 500 finished Friday up 2.24 points (0.09%) at 2,553.17; meanwhile, the Dow Jones Industrial Average rose by 30.71 points (0.13%) to settle at 22,871.72.

Retail sales numbers for September experienced their highest jump in nearly 3 years, helping push indices higher. Residual demand for consumer goods on the heels of Hurricane’s Harvey and Irma also pushed prices higher, helping markets.

Sources: Globe Advisor

Frank Mueller

Weekly Update – October 6, 2017

“Once the speculative tide starts running, few can resist its pull” – John Train

TSX Retreats on Sagging Oil

The Toronto Stock Exchange’s S&P/TSX composite index dropped 47.98 points (0.30%) on the day to close at 15,728.32. On the week, the TSX gained 88 points (0.56%).

The main drag on the TSX on Friday was the cost of a barrel of oil, which dropped by 3%. November Oil Futures shed $1.54USD per barrel to settle at $49.25USD per barrel.

Gold crept higher by 0.45% ($5.70USD per ounce) to finish the week at $1,278.90USD.

The Loonie rose by almost half a penny against the Greenback and settled at an even 80 cents USD.

S&P 500 Ends 6-Day Streak of Record Highs on Declining Jobs Numbers

U.S. non-farms jobs numbers declined for the month of September by 33,000 jobs, according to the Department of Labor. This marks the first monthly jobs decline in 7 years, when the U.S. was still digging its way out of the Great Recession. Analysts believe the aftermath of Hurricanes Harvey and Irma left many southern workers either temporarily displaced, or resulted in new hires being delayed.

The S&P 500’s 6-day streak of record highs was snapped due to the jobs data, settling at 2,549 on a loss of 2.74 points (0.11%); however, the previous streak of record highs lifted the S&P to a weekly gain of 1.19%.

Changes Coming to Canadian Tax Proposals

Finance Minister Bill Morneau confirmed on Wednesday that, after the close of the 75-day consultation window – the Federal Government’s tax proposals will be reviewed and will likely be changed somewhat.

The 3 major changes originally proposed by Minister Morneau centered mostly around Privately Controlled Canadian Corporations, and included: restricting income sprinkling/splitting, limiting passive investments within the corporation, and limiting business owners’ ability to convert regular income into capital gains. You can get a more complete picture of these initial proposals by reading Anthony’s blog.

It can reasonably be assumed that the pushback received during the 75-day consultation window was strong and steady, causing the Federal Government to reconsider the initial proposals. It should be noted, however, that there will not be another consultation period, so any changes made to the initial proposals will not be subject to future feedback.

WEEKLY MARKET WRAP-UP

North America
The TSX closed at 15723, up 88 points or 0.56% over the past week. YTD the TSX is up 2.92%.
The DOW closed at 22774, up 368 points or 1.64% over the past week. YTD the DOW is up 15.24%.
The S&P closed at 2549, up 30 points or 1.19% over the past week. YTD the S&P is up 13.85%.
The Nasdaq closed at 6590, up 94 points or 1.45% over the past week. YTD the Nasdaq is up 22.42%.
Gold closed at 1277, down -19.00 points or -0.39% over the past week. YTD gold is up 12.21%.
Oil closed at 49.31, down -2.27 points or -4.40% over the past week. YTD oil is down -5.57%.
The USD/CAD closed at 0.8, changed 0.0000 points or 0.00% over the past week. YTD the USD/CAD is up 7.83%.

Europe/Asia
The MSCI closed at 2016, up 24 points or 1.20% over the past week. YTD the MSCI is up 15.00%.
The Euro Stoxx 50 closed at 3603, up 8 points or 0.22% over the past week. YTD the Euro Stoxx 50 is up 9.48%.
The FTSE closed at 7523, up 150 points or 2.03% over the past week. YTD the FTSE is up 5.32%.
The CAC closed at 5360, up 30 points or 0.56% over the past week. YTD the CAC is up 10.24%.
DAX closed at 12956, up 127.00 points or 0.99% over the past week. YTD DAX is up 12.85%.
Nikkei closed at 20691, up 335.00 points or 1.65% over the past week. YTD Nikkei is up 8.25%.
The Shanghai closed at 3349, changed 0.0000 points or 0.00% over the past week. YTD the Shanghai is up 7.89%.

Fixed Income
The 10-Yr Bond closed at 2.37, up 0.0400 points or 1.72% over the past week.YTD the 10-Yr Bond is down -3.27%.

Sources: Globe Advisor, Dynamic Funds