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Frank Mueller

Weekly Update – January 5, 2018

“Every accomplishment starts with a decision to try” – Anonymous

New Year, Same Rally

The Toronto Stock Exchange’s S&P/TSX composite index dropped 63.50 points (0.39 per cent) on Friday to finish at 16,349.44. Resources weighed on the TSX on Friday, with oil, gold, copper and other metals pulling back on the day.

However, the TSX enjoyed a gain of 0.9 per cent on the week as the extended market rally continued into 2018.

Statistics Canada announced the December jobs numbers, with 79,000 new jobs being added. One caveat, however, is that most of them were seasonal, part-time positions. However, Canada’s unemployment rate of 5.9% in November was a full percentage point lower than in November 2016.

Retail sales data, housing starts, and consumer confidence levels were all higher year-over-year as well.

U.S. Crude Oil dropped by 42 cents USD per barrel to finish the week at $61.59 USD.

Gold dropped by $1.30 USD per ounce on Friday, and finished at $1,320.30 per ounce.

The Loonie rose by 56 basis points on Friday to finish at 80.61 cents to the Greenback, a rise of 0.6989 per cent.

U.S. Markets Hit More Record Highs

The S&P 500 rose 19.08 points (0.70 per cent) on Friday to close out the week at 2,743.07.

The Dow Jones Industrial Average (DJIA) rose above 25,000 for the first time ever on Thursday, and jumped by 220.74 points (0.88 per cent) on Friday to finish at 25,295.87.

NASDAQ also had a good day on Friday, with a gain of 58.64 points (0.83 per cent).

Some encouraging global economic data helped to propel markets upward. US unemployment figures for November – like Canadian unemployment – were lower than a year prior.

2017 Market Recap

It was, in some ways, a strange year for the Canadian investor. Early in the year, Canadian markets were relatively flat, while south of the border, U.S. markets were (and still are) very hot. Overseas markets advanced. However, as the Canadian dollar appreciated relative to the Greenback, U.S. and many overseas gains were mitigated.

As the year progressed, the Bank of Canada raised rates twice, and the Fed also raised rates. The BoC raising rates led to a dampening of fixed income returns. Luckily, the TSX rebounded late and was able to post a decent, if unremarkable, 6% increase on the year.

Most major international indexes posted double-digit returns; in fact, even factoring the appreciating Loonie, global markets outpaced Canadian markets.

So, what is the lesson here? In our opinion, this information reinforces the benefit of sound diversification, not only between equities and fixed income, but also regional diversification. Canadian investors have the reputation of being the most biased toward domestic markets, and, at least in 2017, the Canadian investor who invested heavily in Canada at the expense of other regions certainly missed out on some significant gains.

If you have questions about your asset allocation or would like to come in for a review of your portfolio, please let us know!

2017 Market Recap: By The Numbers

North America
The TSX finished at 16,209, up 6.0% for 2017
The DOW finished at 24,719, up 25.1% for 2017, or 17.0% in $CDN
The S&P 500 finished at 2,674, up 19.4% for 2017, or 11.7% in $CDN

The NASDAQ finished at 6,903, up 28.2% for 2017, or 19.9% in $CDN
Gold finished at $1,303 USD per ounce, up 13.1% for 2017
Oil finished at $60.42 USD per barrel, up 12.5% for 2017
The USD/CDN finished at 0.7955, up 6.9% for 2017
The CDN/EUR finished at 1.5089, up 6.8% for 2017

Europe/Asia
The MSCI World finished at 2,103, up 20.1% for 2017, or 12.3% in $CDN
The MSCI EAFE finished at 2,051, up 21.8% for 2017, or 13.9% in $CDN
The MSCI EM finished at 1,158, up 34.3% for 2017, or 25.7% in $CDN
The FTSE 100 finished at 7,688, up 7.6% for 2017, or 10.3% in $CDN
The DAX finished at 12,918, up 12.8% for 2017, or 20.4% in $CDN
The Nikkei finished at 22,765, up 18.9% for 2017, or 15.3% in $CDN

Sources: Globe Advisor, TD, Yahoo! Finance

Frank Mueller

Weekly Update – December 8, 2017

“We make a living by what we get, but we make a life by what we give” – Winston Churchill

TSX Rises on to End Week on a Positive

The Toronto Stock Exchange’s S&P/TSX composite index rose by 80.39 points Friday, a 0.50 per cent gain, to close at 16,096.07. On the week, the TSX managed a gain of 57.10 points (0.36 per cent). Nine of the 10 main groups rose on Friday.

Gold dropped $3.90 USD per ounce on Friday (0.31 per cent) to close the week at $1,245.90 per ounce. On the week, this represents a drop of $33.80 an ounce (2.64 per cent).

Increasing Chinese demand for oil, coupled with potential supply-side issues out of Africa, led oil up on Friday; however, oil was down for the week overall. West Texas Intermediate (WTI) closed at $57.33 USD per barrel, up 64 cents (1.13 per cent), but was down 96 cents for the week, a drop of 1.65 per cent.

The Loonie sat at 77.87 cents to the Greenback on Friday (as of 2:14pm), a gain of 12 basis-points (0.17 per cent). On the week, the Canadian Dollar was down 1.02 cents (1.29 per cent).

U.S. Markets All Gain on Friday

Friday saw increases across the board on Wall Street. The Dow Jones Industrial Average (DJIA) was up was up 117.68 points (0.49 per cent) to close the week at 24,329.16.

The S&P 500 gained 14.52 points (0.55 per cent) to finish at 2,651.50.

The NASDAQ rose by 27.24 points (0.40 per cent) and settled at 6,840.08.

November jobs numbers propelled markets upward to end the week, a further signal of a strong economy. Analysts already expected a rate hike next week, and the strong jobs figures propelled this expectation.

CRA Confirms 2018 Tax-Free Savings Account Room

This week, the Canada Revenue Agency (CRA) announced the new Tax-Free Savings Account (TFSA) room for 2018 will be unchanged at $5,500.

How does this announcement affect your investment portfolio? Well, this is $5,500 of new space to shelter your investments from capital gains tax. Remember that you contribute net income to your TFSA because unlike the RRSP, you don’t get a tax savings on your contributions to a TFSA. However, you get the tax savings when you make withdrawals from your TFSA – you pay no capital gains whatsoever – and you also enjoy tax-sheltered growth while your money is in the TFSA itself.

If you have questions about how best to invest your money, be it to an RRSP, TFSA or to a Non-Registered account, give us a call and we can discuss your specific needs!

Weekly Market Wrap-Up

North America
The TSX closed at 16,097, up 58 points or 0.36% over the past week. YTD the TSX is up 5.37%.
The DOW closed at 24,329, up 97 points or 0.40% over the past week. YTD the DOW is up 23.10%.
The S&P closed at 2,652, up 10 points or 0.38% over the past week. YTD the S&P is up 18.45%.
The Nasdaq closed at 6,838, down -10 points or -0.15% over the past week. YTD the Nasdaq is up 27.03%.
Gold closed at 1,246, down -8.00 points or -2.88% over the past week. YTD gold is up 9.49%.
Oil closed at 57.34, down -1.00 points or -1.71% over the past week. YTD oil is up 9.80%.
The USD/CAD closed at 0.77714, down -0.0108 points or -1.37% over the past week. YTD the USD/CAD is up 4.75%.

Europe/Asia
The MSCI closed at 2064, down -13 points or -0.63% over the past week. YTD the MSCI is up 17.74%.
The Euro Stoxx 50 closed at 3592, up 64 points or 1.81% over the past week. YTD the Euro Stoxx 50 is up 9.15%.
The FTSE closed at 7394, up 93 points or 1.27% over the past week. YTD the FTSE is up 3.51%.
The CAC closed at 5399, up 82 points or 1.54% over the past week. YTD the CAC is up 11.04%.
DAX closed at 13154, up 292.00 points or 2.27% over the past week. YTD DAX is up 14.57%.
Nikkei closed at 22811, down -8.00 points or -0.04% over the past week. YTD Nikkei is up 19.34%.
The Shanghai closed at 3290, down -28.0000 points or -0.84% over the past week. YTD the Shanghai is up 5.99%.

Fixed Income
The 10-Yr Bond closed at 2.38, up 0.0200 points or 0.85% over the past week.YTD the 10-Yr Bond is down -2.86%.

Sources: Globe Advisor, Yahoo! Finance, cbc.ca, Bank of Canada, Dynamic

Frank Mueller

Weekly Update – November 3, 2017

“A budget is telling your money where to go instead of wondering where it went” – Dave Ramsey

TSX Gains for Eighth Straight Week

The Toronto Stock Exchange’s S&P/TSX composite index rose 5.17 points (0.03 per cent) to finish at 16,020.16. The TSX was up 66.85 points (0.42 per cent) over last week’s finish at 15,953.51. This is the eighth straight week of gains for the Canada’s main trading index, and the first time the TSX has broken the 16,000 watermark.

Five of the TSX’s 10 main sectors were up on Friday.

Financials, Materials and Industrials were notable sectors to experience drops on Friday, while the Energy sector ticked higher.

The October jobs report painted a rosy picture for Canada, with a greater-than-expected jobs boost and the largest wage increase in 18 months.

International trade data for September was less encouraging; both imports and exports decreased for the fourth consecutive month.

Gold dipped by almost eight dollars per ounce to finish Friday at $1,270.20 USD per ounce.

The Loonie rose on Friday to 78.37 cents to the Greenback, an increase of 33 basis-points for the day and 42 basis-points (0.54 per cent) on the week.

U.S. Job Growth Increases in October, Rate Hike Likely

As the southern states work to recover from a succession of battering hurricanes, the U.S. job market has picked up again; however, less encouraging numbers point to a slowdown in annual wage increases. Also, there has been an increase in people dropping out of the workforce altogether.

Investors rate the chance of a rate hike by U.S. Federal Reserve Chair Janet Yellen at over 90 per cent. If a rate hike does occur, one might expect the CAD to depreciate in relation to the Greenback.

Over 72 per cent of the 406 S&P 500 companies to report their Q3 earnings exceeded their expected earnings expectations. The S&P 500 increased by 7.99 points (0.31 per cent) on Friday to settle at 2,587.84.

The Dow Jones Industrial Average (DJIA) continued its ascent with a 22.93 (0.10 per cent) increase on Friday, to settle at 23,539.19. On the week, the DJIA rose by 106.41 points (0.45 per cent) over last week’s 23,432.78 finish.

NASDAQ continues to be propelled by the so-called FAANG (Facebook, Amazon, Apple, Netflix, Google), and rose 49.49 points (0.74 per cent) on Friday, settling at 6,764.44.

The Volatility S&P 500 (VIX), a market volatility index, dropped by 7.96 per cent on Friday to finish at 9.14, its lowest close in over 5 years.

WEEKLY MARKET WRAP-UP

North America
The DOW closed at 23,539, up 106 points or 0.45% over the past week. YTD the DOW is up 19.11%.
The S&P closed at 2,588, up 7 points or 0.27% over the past week. YTD the S&P is up 15.59%.
The NASDAQ closed at 6,764, up 64 points or 0.96% over the past week. YTD the NASDAQ is up 25.67%.
Gold closed at 1,270, down -7.00 points or -0.39% over the past week. YTD gold is up 11.60%.
Oil closed at 55.66, up 1.47 points or 2.71% over the past week. YTD oil is up 6.59%.
The USD/CAD closed at 0.78, changed 0.0000 points or 0.00% over the past week. YTD the USD/CAD is up 5.14%.

Europe/Asia
The MSCI closed at 2,043, up 17 points or 0.84% over the past week. YTD the MSCI is up 16.54%.
The Euro Stoxx 50 closed at 3,690, up 38 points or 1.04% over the past week. YTD the Euro Stoxx 50 is up 12.12%.
The FTSE closed at 7,560, up 55 points or 0.73% over the past week. YTD the FTSE is up 5.84%.
The CAC closed at 5,518, up 24 points or 0.44% over the past week. YTD the CAC is up 13.49%.
DAX closed at 13,479, up 261.00 points or 1.97% over the past week. YTD DAX is up 17.40%.
Nikkei closed at 22,539, up 530.00 points or 2.41% over the past week. YTD Nikkei is up 17.92%.
The Shanghai closed at 3,372, down -45.0000 points or -1.32% over the past week. YTD the Shanghai is up 8.63%.

Fixed Income
The 10-Yr Bond closed at 2.34, down -0.0900 points or -3.70% over the past week. YTD the 10-Yr Bond is down 4.49%.

Sources: Globe Advisor, Yahoo! Finance

Frank Mueller

Weekly Update – September 22, 2017

“The stock market demands conviction; it victimizes the unconvinced” – Peter Lynch

TSX Flat to Finish the Week, But Gains 1.25% Overall

The Toronto Stock Exchange’s S&P/TSX composite index finished with a drop of 0.69 points on the day, settling at 15,454.23. For the week, the TSX rose by 281.20 points (1.85%), and hit a 14-week high in doing so. 7 of the 10 main index sectors were up on the day.

The TSX concluded the week on Friday with a 0.31-point rise to settle at 15,173.03. This finish represents a rise of 1.25% over last week’s finish at 14,985.32. Declines in energy and utilities weighed on the TSX, while the consumer discretionary/staples sector gained on the day.

The Loonie barely moved vs the Greenback on Friday, and sat at 81.10 cents USD as of 2:45pm PST, off by about a cent compared to last Friday’s finish of 82.08 cents.

Light, Sweet Crude Oil Barrel futures finished the week above $50 at $50.66 per barrel.

Gold again dropped this week – off $23.00 USD on the week – to finish the week at $1,300.50 USD, as investors eased away from the safe-haven asset.

U.S. Federal Intends to Reduce Balance Sheet, Signals Rate Hike to Close Out 2017

The U.S. Federal Reserve announced its intention to reduce its balance sheet of ≈ $4.2 Trillion (USD) in U.S. Treasury bonds and mortgage-backed securities. Fed Chair Janet Yellen also signaled a rate hike before the end of 2017.

The market pegs the odds of a December rate hike at about 70%. Prior to the Federal Reserve meeting earlier this week, the odds of a December rate hike sat at 51%, according to investors.

The Federal Reserve offered no answers for the inflation decrease this year, and Michael Dowdall – investment strategist at BMO Global Asset Management – offered that “Clearly, the Fed doesn’t have answers on the 2017 low inflation weakness, but they’re still very sensitive to falling behind the curve so they want to stay in front of the inflation curve.”

On the heels of the Fed announcement to hold rates and reduce the balance sheet, valuations spiked. The S&P 500 was trading at 17.6 times expected earnings as of end-of-day Thursday; comparatively, the S&P 500’s 10-year average is 14.3 times expected earnings.

Sources: Globe Advisor, Advisor.ca