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Terry Broaders

Weekly Update June 23 2017

“Well Begun Is Half Done” – Aristotle

 

TSX Rallies On Resource Stocks

Canada’s main stock index rallied on the strength of resource stocks, but shares in BlackBerry plunged after its first-quarter sales failed to meet expectations. The S&P/TSX composite index advanced 99.66 points to 15,319.56, with the base metals and gold sectors leading the way. Blackberry shares dropped more than 12% after the company announced a profit of US$671 million in its latest quarter, despite revenue falling to US$235 million compared with US$400 million a year ago. In New York, the Dow Jones industrial average shed 2.53 points to 21,394.76. The S&P 500 edged up 3.80 points to 2,438.30, while the Nasdaq composite gained 28.56 points at 6,265.25. The Canadian dollar was trading 0.15 of a U.S. cent lower to an average price of US75.37¢. The August crude contract was up US27¢ at US$43.01 per barrel and the July natural gas contract advanced US4¢ at US$2.93 per mmBTU. The August gold contract gained US$7 at US$1,256.40 an ounce and the July copper contract added US3¢ at US$2.62 a pound.

 

Canada’s Most ‘Emotional’ Investors Revealed 

Do you ever wonder why some people seem more prone to making rash or emotional investment decisions? Well, a new survey reveals which groups are most likely to buy stocks based on headlines and hype. Conducted by Hennick Wealth Management, the survey of Canadian investors found that higher income earners ($75K – $150K+) were more likely to make an investment decision based on a ‘hunch’ or a tip from a friend. 11.8% of high income earners said they would buy a stock solely on a friend’s recommendation compared with just 5.3% of low-to-mid income earners ($0K-74K.)

Men (13.7%) were twice as likely to make emotional investments and buy stocks based on a hunch than women (7.5%). Men (34.2%) were also much more like to buy a stock based on the recommendation of a friend compared with women (27.8%). “Men seem particularly influenced by ‘insider advice’ from other males when investing,” said Adam Hennick of Hennick Wealth Management.  “If you do take investment advice for a friend, try to do it from your friends that have been successful in investing. This seems obvious, but sometimes our desire to act on a hot tip can overwhelm our logic. Ask yourself, is this a person who’s actually done financially well in investing, or someone who just talks a good game.”

All savvy investors know that making decisions based on emotions is a recipe for disaster, so it should come as no surprise that 22.7% of Canadians said they have regretted an investment decision they made that was based on emotion. A staggering 69.2% of men with a high income regretted making an investment decision based on a hunch or gut instinct.

Sources: Bloomberg; Investment Executive; advisor.ca

Frank Mueller

Weekly Update – June 16, 2017

“No man has a good enough memory to be a successful liar” – Abraham Lincoln

Toronto Stock Exchange Finishes Down For the Week as Financials, Energy and Minerals Slump

The Toronto Stock Exchange’s S&P/TSX composite index rose 31.97 points, to finish at 15,192.54, as 6 of the 10 main sectors finished higher than they opened. For the week, the TSX was down 280.67 points, and on Thursday, the TSX dropped to a 6-month low. The usual suspects were at work this week, with the financial, energy and mineral sectors retreating.

Oil suffered a steep drop on Wednesday before rebounding slightly to close out the week. Gold dropped by $14 per ounce for the week, to finish up at $1,255.20 per ounce. Earlier in the week, the heavyweight banks fell off after some gains last week.

The possibility of a Bank of Canada rate hike in the near future was raised on Monday on comments from a Bank of Canada senior official.

Amazon Announces Deal to Buy Whole Foods, Federal Reserve Raises Key Rate

South of the border, the Federal Reserve opted to raise its key rate to a range of 1% – 1.25%, its highest level since the Global Economic Crisis of 2008. Fed Chair Janet Yellen’s commentary on the matter has led some analysts to conclude that another rate hike will be coming later this year. Analysts are weighing how much the rate increase will affect the economy.

In other news, Amazon announced a major deal to buy Whole Foods for $13.7 Billion. This announcement led to downswings in the consumer staples sector, and these drops weighed on the Dow Jones Industrial Average (DJIA) overall, resulting in a muted rise of 24.38 points to close up at 21,384.28 overall.

The NASDAQ was pulled lower by Apple – among others – to drop 13.74 points to finish at 2,433.15.

U.S. home starts dropped for the third straight month in May.

Sources: Globe Advisor

Frank Mueller

Weekly Update – June 9, 2017

“An ounce of performance is worth pounds of promises” – Mae West

Toronto Stock Exchange Rises to End a Busy Week

The Toronto Stock Exchange’s S&P/TSX composite index, bolstered by strong Canadian jobs data and gains in the financial sector, rose by 50.12 points to close at 15,473.21 to close out a news-filled week. However, only 3 of the 10 main sectors posted gains for the day.

Statistics Canada reported a substantial rise in employment levels for May. The Canadian workplace added 77,000 new full-time jobs in May. Somewhat ironically, the unemployment rate actually rose to 6.6%, due to an increase in people entering the jobs market. Still, the May jobs numbers offer no sign of a market slowdown, so we can expect the economy to continue its trajectory in the short-term. Job gains for the month were highest in BC, Ontario and Quebec.

On Friday, the Dow Jones Industrial Average closed the week at 21,271.97 on a rise of 89.44 points, the S&P 500 lost 2.02 points to close at 2,431.77 and the NASDAQ slipped by 113.85 to close at 6,207.92.

“Triple Threat Thursday”, Part I

The much-anticipated open-session testimony of former F.B.I. Director James Comey took place on Thursday morning. Mr. Comey testified that he took detailed notes of his meetings with President Trump because he felt Mr. Trump would lie about those meetings. He further asserted that in his opinion, he was directed by Mr. Trump to end the F.B.I. investigation of former National Security Advisor Mike Flynn. Mr. Comey also said he believed he was fired because of the investigation into Russia’s meddling in the 2016 Presidential Election.

Initial reaction to the testimony in the markets appears to have been muted, with some analysts feeling that Mr. Comey’s testimony wasn’t damaging enough to the President to seriously threaten his position; however, it should be noted that Mr. Comey was later questioned by the Senate committee in a classified (closed-session) hearing that could be far more damaging to the Mr. Trump and his administration.

“Triple Threat Thursday”, Part II

European Central Bank chief Mario Draghi signaled that he had no plans to cut back the bank’s stimulus, even though reports of the Euro zone growing rapidly on Thursday morning. Mr. Draghi stated that he expects the ECB will “be in the market for a long time”. His commentary led to a jump in European bonds and a short-lived drop in the Euro and bank shares, as signs of a Euro zone bank rescue in Italy led to a rebound in bank and energy stocks.

“Triple Threat Thursday”, Part III

In what could gently be called a “political gamble gone awry”, British Prime Minister Theresa May’s calling for a snap election – designed to strengthen her majority – did not end the way she’d have liked. She called for an election a month ago, emboldened by a double-digit lead in the polls, and with the goal of silencing those who wanted to stop or reverse the Brexit process.

Her goal gaining on her majority backfired, as the Conservative Party lost 13 seats, dropping from a Majority Government holding 331 seats in the 2015 Election down to a 318-seat Minority Government.

The resulting uncertainty around the Minority Government led to the largest drop in the Pound Sterling in 8 months, before it rebounded slightly on Friday.

Sources: Globe Advisor, Huffington Post, The Guardian

Terry Broaders

Weekly Update June 2 2017

“In Nature Nothing Exists Alone” – Rachel Carson

 

U.S. Markets Hit Records In Spite of Weaker Than Expected Jobs Datat

U.S. stock markets shrugged off weaker than expected jobs data and hit all-time highs, while lower oil prices weighed on the Toronto stock market. The Toronto Stock Exchange’s S&P/TSX composite index retreated 27.16 points to 15,442.75, while the loonie lost 0.02 of a cent to US74.05¢. South of the border, all three of the main stock indexes hit new records, with the Dow Jones industrial average gaining 62.11 points to 21,206.29. The S&P 500 index added 9.01 points to 2,439.07 while the Nasdaq composite index rose 58.97 points to 6,305.80.
Canadian exports climbed to a record in April and first-quarter labour productivity approached a three-year high, further evidence that the economy is recovering after a long slump caused by low oil prices. In commodities news, the July oil contract was down US70¢ to US$47.66 per barrel.

 

IMF Warns About Housing and Household Debt 

The International Monetary Fund is warning about the risks to the Canadian economy due to a possible correction in the housing market and urged governments to do more to protect against them. In the preliminary findings of its annual review of the Canadian economy, the IMF said Wednesday that a further tightening of macroprudential and tax-based measures to mitigate speculative and investment activity should be considered. It also called for greater co-ordination between federal and provincial regulators as well as government efforts to collect more comprehensive data on real estate transactions.
Ottawa has moved several times in recent years to tighten mortgage lending rules, including expanded stress tests on mortgages. A foreign buyer tax of 15% was implemented in the Vancouver region last summer, while Ontario recently announced plans for a similar levy for the Greater Toronto Area. Cheng Hoon Lim, the IMF’s mission chief for Canada, said there are a few policies that could help deter speculation in the housing market and alleviate concerns about rising debt burdens. “Among these measures, a cap on household debt to income or more stringent qualification criteria for household debt above a certain threshold will go directly to addressing household indebtedness,” she said. The IMF also encouraged B.C. and Ontario to replace their foreign buyer taxes. “This could include a combination of prudential and tax-based measures that discourage speculative activity without discriminating between residents and non-residents,” it said.

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update May 26 2017

“All The Boys and Girls of Today Are The Men and Women of Tomorrow ” – Jimmy Cliff

 

North American Stocks Flat

North American stock markets were relatively flat Friday, while the price of oil rebounded after dropping nearly US$2.50 a barrel the day before. The S&P/TSX composite index inched forward 6.20 points to 15,416.93 as the gold sector led the way. The June gold contract soared US$11.70 to US$1,268.10 an ounce, while the S&P/TSX global gold index gained 0.74%. “We’re still seeing the U.S. dollar sub-performing and I think that’s giving gold some support,” said Andrew Pyle, a senior wealth adviser at Scotia Wealth Management. The U.S. dollar’s lacklustre performance comes in part from doubts about whether the U.S. Federal Reserve will raise rates at its June meeting, as well as economic conditions not showing enough acceleration, he said.

Meanwhile, the July crude oil contract rose US90¢ to US$49.80 per barrel, helping the energy sector in Toronto gain 0.39%. The increase came a day after investors showed disappointment over OPEC’s decision to extend production cuts by nine months. Some had hoped for deeper and longer cuts.

In New York, the Dow Jones industrial average shed 2.67 points to 21,080.28. The S&P 500 index gained a meagre three-quarters of a point to a record-high 2,415.82, while the Nasdaq composite index rose 4.93 points to a record-high 6,210.19. The U.S. markets will be closed Monday for the Memorial Day holiday. The Canadian dollar fell 0.01 of a U.S. cent to an average price of US74.32¢.

 

Canadian Youth Rank 2nd In Financial Literacy 

Canadian youth surpass their global peers when it comes to financial literacy. A survey from the Organization for Economic Co-operation and Development (OECD) finds that 87% of Canadian students perform at or above a baseline level of proficiency in financial literacy. That compares to about 78% of students in the other OECD countries. Overall, Canada ranked second — tied with Belgium — out of 15 countries. China scooped the number-one spot.
About 22% of Canadian students surveyed are top performers in financial literacy — proficient at the survey’s highest level. These students can analyze complex financial products, solve non-routine financial problems and show an understanding of the wider financial landscape. A sample question asked students to identify and respond appropriately to a financial scam email message.
In the other OECD countries, only 12% of students are top performers. China was the exception, with 33% of students being top performers. On average, students with a bank account have higher financial literacy than students without accounts. More than three-quarters of 15-year-old Canadian students (78%) have bank accounts. That’s significantly higher that the OECD average of 56%. Four out of five Canadian students said that if they didn’t have enough money to buy something they really wanted, they would either save up to buy it or would forgo. About 52% of Canadian students report that they save each week or month.

In 2015, close to 48,000 students from 15 countries and economies took part in the financial literacy assessment. In Canada, approximately 3,400 15-year-olds from seven provinces (Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Manitoba and British Columbia) participated. worse when they were highly confident of their performance.”

 

 

 

Sources: Bloomberg; Investment Executive; advisor.ca; OECD

Frank Mueller

Weekly Update – May 19, 2017

“I’m in the business where I can’t ever say there’s no risk associated with someone” – James Comey

Toronto Stock Exchange (TSX) and Other Major Indices Rally to End the Week

The Toronto Stock Exchange’s S&P/TSX composite index rallied to gain 181.3 points on Friday, good for a 1.19% increase, pushed higher by energy and financials, to close out the week at 15,458.46. 9 of the 10 main sectors on the TSX rose on Friday. The energy sector rose by 3.25%. The Loonie jumped by half a cent to finish the week at 73.97 cents US, due partially to the annual inflation rate of 1.6% holding steady throughout April. Gold rose to finish at $1,253.87 per ounce.

The rally followed Wednesday’s dismal performance, as investors worried about the leaked Comey memos from his meeting with Trump in February. Indeed, Wednesday was the worst day for the TSX in 8 months.

South of the 49th parallel, the Dow Jones Industrial Average finished the week at 20,804.84 after a Friday that saw a rise of 141.82 points (0.69%). The S&P500 and NASDAQ also posted gains on Friday, although – like the TSX – all 3 indices were down for the week on the heels of the leaked James Comey memos. The U.S. Dollar lost ground against its counterparts this week, also thanks to the Comey memos. The Greenback lost 0.75% on Friday alone, and over 2% for the week.

Reverberations from Comey Firing Carry into this Week

All eyes are on the White House it seems, with new information coming to light almost hourly. This added attention on the political forum led to some steep drops mid-week, before markets rallied on Thursday and Friday. Looking forward, it doesn’t appear that this story is going anywhere. Democrats and now even some Republicans have uttered the dreaded “I-word” (Impeachment), not yet 5 months into Trump’s presidency.

One thing markets don’t like is uncertainty. With the uncertainty surrounding the White House, there is bound to be some market volatility in the near-future, as more information is dug up.

You can read a more in-depth analysis of our short- and long-term market outlook in our blog “Will Donald Trump Get Impeached?”. The link is at the bottom of this page.

Sources: Globe Advisor

Links

Will Donald Trump Get Impeached?