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Terry Broaders

Weekly Update August 25 2015

“During An Election The Air Is Full of Speeches – And Vice Versa” -Anonymous

 

Markets Endure A Rough Week

World stock markets tumbled and commodity prices slid on Friday after new data provided further evidence of slowing economic growth in China. Crude oil prices fell again, posting their longest weekly losing streak in nearly 30 years, and emerging market stocks, bonds and currencies were all lower, with slowing Chinese growth reducing demand for commodities from developing countries. Canada’s main stock index fell almost 2 per cent, capping a woeful week as investors exited heavyweight financial and resource stocks, while telecoms was the only sector to escape the rout. The Toronto Stock Exchange’s S&P/TSX composite index ended down 263.33 points, or 1.92 per cent, at 13,473.67. It lost 5.6 per cent in the week, its worst weekly slump since September 2011.  The Dow Jones industrial average fell 530.81 points, or 3.12 per cent, to 16,459.88, the S&P 500 lost 64.7 points, or 3.18 per cent, to 1,971.03 and the Nasdaq Composite dropped 171.45 points, or 3.52 per cent, to 4,706.04.
“People are using China as the main thing as an excuse for selling,” said Keith Bliss, senior vice-president at brokerage firm Cuttone & Co in New York.  ”A lot of people know this is way overdone. They are just waiting and they are going to step back in next week.”

 

RCMP Warns of Fraudulent Scheme

The Royal Canadian Mounted Police is warning the public of fraudulent phone calls in which the caller claims to be an RCMP officer and informs individuals that they owe fines or income taxes. The scammer then threatens to arrest those individuals within 24 hours if they do not pay immediately. “Be aware: the RCMP does not contact individuals for the purpose of collecting fines or taxes,” the RCMP’s announcement states. “These types of telephone scams are designed to create such shock and anxiety that victims respond by sending money quickly in order to fix the problem.” What likely confuses victims of the scam is that a number for the RCMP will appear on victims’ call displays in most cases. Anyone who has received these phone calls or knows of someone who has is being asked to contact his or her local police force as well as the Canadian Anti-Fraud Centre at 1-888-495-8501.
Members of the public are also being directed to Canadian Anti-Fraud Centre’s website (www.antifraudcentre-centreantifraude.ca/index-eng.htm) to learn how to protect themselves against various fraudulent activities.

 

Blog Links

Should You Incorporate or Remain a Sole Proprietor ?

New Lower RRIF Income Payment Rules   

 

Sources: Bloomberg; Investment Executive;  advisor.ca

Odette Morin

Stocks end painful day with biggest drop in 4 years. Should you be worried?

market crash

 

Market volatility has continued today, with markets opening in correction territory, only to rebound somewhat as of midday. Global equity markets have been under significant selling pressure over the past week. The volatility catalyst is tied to the recent moves China made to let their currency depreciate.

Within the span of the past several months we have seen three major global capital market regime changes: the breakdown of the 40-year old OPEC oil cartel and a downward spiral in crude prices; a generational shift in the Chinese economy from fixed asset spending to a consumer driven model; and Lastly, on the horizon we face the change from the US Federal Reserve’s zero interest rate policy to a tightening bias not seen in seven years.

That said, outside the energy sector earnings for the S&P 500 companies grew approximately 4% for the most recent quarter on a year-over-year basis.  Not stellar, but hardly recessionary.

What are the reasons to believe this is more likely a temporary pause in the current bull market?

In the United States the consumer remains healthy.  The labour market continues to improve and wages are growing.  US housing starts rose in July, a seven year high yet still 20% below the long term average.  Housing has lagged household formation and there is catching up to do.

While it is difficult to assess the magnitude of any period of panic selling in equity markets given that the performance variance of these events is so wide through time, the duration for this bout of weakness is likely to be measured in days or weeks…not in quarters or years. The near 15% sell-off in 2010 and close to 18% sell-off in 2011 were incredibly uncomfortable, but they did not mark the beginning of the end of the bull market. Keep in mind that the S&P 500 has experienced, on average, an intra-year drop of 14.2% over the past 35-40 years and we have had many positive longer-term outcomes.

The deepest, longest and thus most destructive equity market sell-offs have typically been associated with economic contraction. Currently, we believe the odds of a global recession remains rather low. European, Japanese and American leading economic data continue to point to either healthy or accelerating activity over the next 9-12 months. This should ultimately translate into a better tone to earnings and help to place a higher floor under share prices. It is times just like these when it becomes incredibly important not to give into emotion, but to follow your well thought out and pre-defined investment program.

­­­­­­­­­­­­­­­­­­­Like I wrote to a client today. Please do not worry.  In our investing years we will go through a lot of volatility.  Unfortunately, reacting would be a mistake. We could sell now and markets could recover more quickly than we thought and you would be left with the lower valuation.  It is safer to stay the course and ignore market swings.  For every stock sold, there is a buyer at the other end which thinks it is a good time to buy.  For the patient investor, it will have proven an excellent investment.   The market value of our account is less important that the dividends it generates.

Here is my investing 101 word of wisdom.

Always remember that equity investment returns are closely tied to corporate earnings growth and the price you pay for those earnings. Historically, over the long term corporate earnings have been fairly stable and have grown along with productivity gains and inflation. Stock valuations though are more volatile than earnings since they are influenced by investor sentiment, which swings between optimism and pessimism.

To summarize, be prepared for a period of volatility in the month ahead.  Europe is slowing, the Feds will start raising rates and the price of oil is set to stay low for a while.  But this should not change anything about the way you invest.  Use this period as a time of buying opportunity if you can and enjoy the stability offered through dividends.

Please feel free to call me, Terry or Anthony anytime to review your account or to book a meeting.
Some of the key market highlights outlined above were obtained from RBC, TD, Manulife and Dynamic funds market commentaries.

Terry Broaders

Weekly Update July 21 2015

“People Won’t Have Time For You If You Are Always Angry or Complaining” -Stephen Hawking

 

TSX Snaps Fine Day Rally

Canadian stocks fell Friday, halting the biggest rally since February, as raw-materials producers sank with commodities prices amid a slump in the nation’s currency to a six-year low. The Standard & Poor’s/TSX Composite Index fell 88 points, or 0.6%, to 14,642. The benchmark equity gauge had gained 3.2% in the past five days. Gold prices tumbled 1% in New York, the lowest close since April 2010, as a commodity meltdown deepened amid an expanding glut in supplies of assets from gold to oil and wheat. The Canadian dollar weakened to a six-year low amid speculation the nation’s central bank will cut interest rates again to buttress a weakening economy. The price of crude oil, the nation’s top export, is down 51% in the past year. Energy stocks have slumped 11% this year, the worst- performing industry in the S&P/TSX. The Nasdaq Composite added 46 points, or 0.91% to end at 5,210, its second straight record high close. The S&P 500 gained 2.35 points, or 0.11%, to end at 2,126, just shy of its record high of 2,130.82. The Dow Jones industrial average fell 33.8 points or 0.19%, to 18,086.

 

Toronto, Vancouver Real Estate Markets Still Hot

Toronto had the hottest real estate market in the country during the second quarter, with double-digit increases in all types of housing, finds Royal LePage. The Vancouver market was also strong with double-digit price increases for two-storey homes and detached bungalows, although condo prices were up a more moderate 6%. But prices were down for some types of residential property in Montreal, Calgary and Winnipeg. Royal LePage says other major markets across the country saw moderate increases or flat prices for most types of housing during the quarter, including in Halifax, Fredericton, Ottawa and Edmonton. The national average price of a bungalow was up 7.5% from last year at $438,938. The average price for two-storey detached houses rose 6.8% to $471,002 and the average condo price was $268.583, up 3.9%.

Royal LePage notes the standard condominium price in Calgary was up 1.6% from a year ago at $291,022, while prices for standard two-storey homes declined 3.1% to $474,239 and detached bungalows slipped 0.9% to $496,689.  The Calgary market has been remarkably stable with only marginal price differences compared to the same period last year, Zaharko notes. The volume of transactions in Calgary was down compared with the same time last year, when oil prices were near recent highs, but about flat compared with the second quarter of 2013.

 

Blog Links

Are We In A Recession? Who Cares ! 

 

Market Update as of July 17 2015

North America

The TSX closed at 14643, up 232 points or 1.61% over the past week. YTD the TSX is down -0.75%.
The DOW closed at 18087, up 327 points or 1.84% over the past week. YTD the DOW is up 1.42%.
The S&P closed at 2127, up 50 points or 2.41% over the past week. YTD the S&P is up 3.35%.
The Nasdaq closed at 5210, up 212 points or 4.24% over the past week. YTD the Nasdaq is up 10.22%.
Gold closed at 1133, down -26.00 points or -2.24% over the past week. YTD gold is down -3.33%.
Oil closed at 50.79, down -1.95 points or -3.70% over the past week. YTD oil is down -3.61%.
The USD/CAD closed at 1.297285, up 0.0260 points or 2.05% over the past week. YTD the USD/CAD is up 10.54%.

Europe/Asia
The MSCI World closed at 1782, up 35.00 Points or 3.75% over the past week.  YTD the MSCI World is up 4.23%.
The Euro Stoxx 50 closed at 3670, up 141.00 points or 4.01% over the past week.  YTD the Euro Stoxx 50 is up 16.65%.
The FTSE closed at 6775, up 102.00 points or 1.52% over the past week.  YTD the FTSE is up 3.18%.
The CAC closed at 5124, up 221.00 points or 4.51% over the past week.  YTD the CAC is up 19.93%.
The DAX closed at 11673, down 357.00 points or 3.16% over the past week.  YTD the DAX is up 19.05%.
The Shanghai closed at 3957, up 79.00 points or 2.05% over the past week.  YTD the Shanghai is up 22.34%.
The Nikkei closed at 20651, up 871.00 points or 4.40% over the past week.  YTD the Nikkei is up 18.34%.

 

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update June 15 2015

“I Praise Loudly, I Blame Softly” -Queen Catherine II

 

Markets Lower as Greece Stalls

Stock markets on both sides of the Atlantic turned lower Friday on renewed fears over a possible Greek debt default. In Toronto, the S&P/TSX composite index closed down 89.73 points at 14,741.15, with energy and financial issues among the leading decliners as benchmark oil once again fell below US$60 a barrel. The loonie, meanwhile, was off 0.22 of a U.S. cent at 81.25 cents as the American greenback strengthened.

In New York, markets gave back a big chunk of their advance over the previous two sessions, with the Dow Jones industrial average suffering a triple-digit loss, down 140 points at 17,898. The Nasdaq index fell 31 points to 5,051, while the S&P 500 finished 14 points lower at 2,094. The decline, which followed similar setbacks on most European bourses, came after an unexpected decision late Thursday by the International Monetary Fund to walk out of the debt negotiations with Greece. The announcement by the IMF, which cited lack of progress in the talks, heightened concerns that Athens may default on its debts when its 240-billion-euro bailout expires June 30. That in turn could force it out of the euro. Greece said Friday that it would present new proposals over the weekend in an attempt to breathe life into stalled talks, but confirmation didn’t come until after the close of markets in Europe. The main index in Athens suffered the most, down 5.9%, but other indexes were also sharply lower, with Germany’s DAX losing 1.2%, the CAC-40 in France off 1.4% and Britain’s FTSE 100 down 1%.

 

Canada Revenue Agency Warns of Scams

The Canada Revenue Agency (CRA) is warning taxpayers about an apparent increase in telephone scams, using increasingly aggressive tactics.  There has been an increase in scams involving telephone calls where the caller claims to be from the CRA, but is not, the agency reports. These calls are fraudulent and could result in identity theft, or financial losses, it warns. “Some recent telephone scams involve threatening taxpayers or using aggressive and forceful language to scare them into paying fictitious debt to the CRA,” the agency says. In these scams, the perpetrator claiming to work for the CRA tells prospective victims that they owe taxes, and they request immediate payment by credit card, or convince the victims to purchase a prepaid credit card and to call back immediately with the information. “The taxpayer is often threatened with court charges, jail or deportation,” the CRA says. Taxpayers should be beware of these sorts of calls, the agency says, and report them to the Canadian Anti-Fraud Centre.
The CRA never requests prepaid credit cards, never asks for information about passports, health cards, or driver’s licences, and never leaves personal information on an answering machine, or asks taxpayers to leave a message containing personal information, the agency stresses.

 

Market Update as of June 12 2015

The TSX closed at 14741, down -216 points or -1.44% over the past week. YTD the TSX is down -0.09%.
The DOW closed at 17899, up 49 points or 0.27% over the past week.YTD the DOW is up 0.37%.
The S&P closed at 2094, up 1 points or 0.05% over the past week.YTD the S&P is up 1.75%.
The Nasdaq closed at 5051, down -18 points or -0.36% over the past week.YTD the Nasdaq is up 6.85%.
Gold closed at 1181, up 10.00 points or 0.85% over the past week.YTD gold is up 0.77%.
Oil closed at 59.97, up 1.09 points or 1.85% over the past week.YTD oil is up 13.82%.
The USD/CAD closed at 1.231102, down -0.0123 points or -0.99% over the past week.YTD the USD/CAD is up 4.90%.

 

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update June 9 2015

 

“I Am Looking For An Honest Man” -Diogenes

 

TSX End Lower In a Broad Decline

Canadian stocks fell Friday for a second day, ending at a two-month low, after gold miners slumped as the dollar surged amid better-than-forecast hiring gains in the U.S. and Canada. The Standard & Poor’s/TSX Composite Index slipped 62.23 points, or 0.4 per cent, to 14,957.16 in Toronto. The gauge dropped 0.4 per cent for the week. Canada added six times as many jobs in May as economists predicted, with the job market proving robust even as the economy recovers from the effects of plunging crude-oil prices. Nine of 10 industries in the S&P/TSX declined Friday on trading volume 10 per cent lower than the 30-day average. The loonie was up 0.42 of a U.S. cent to 80.39 cents.

The Dow and S&P 500 eased on Friday as increasing expectations the Federal Reserve could raise rates as soon as September offset optimism over a recovery in the U.S. labour market. Stronger-than-expected jobs data for May and a pickup in wages were the latest signs of better momentum in the economy. Wall Street’s top banks said they expect the Fed to begin raising interest rates in September, followed by another increase before the end of the year, according to a Reuters poll. The Dow Jones industrial average fell 56.12 points, or 0.31 per cent, to 17,849.46, the S&P 500 lost 3.01 points, or 0.14 per cent, to 2,092.83 and the Nasdaq Composite added 9.33 points, or 0.18 per cent, to 5,068.46. For the week, the S&P 500 fell 0.7 per cent, its second straight week of losses, the Dow was down 0.9 per cent and the Nasdaq was down 0.03 per cent.

 

Canada Adds 59,000 Jobs in May

Canada’s economy added 59,000 jobs last month, but the jobless rate stayed the same at 6.8 % because more people were looking for work. Statistics Canada reported Friday that employment increased in Ontario, British Columbia and Nova Scotia, while it declined in Newfoundland and Labrador, Manitoba and New Brunswick. The rest of the country’s labour force was just about unchanged. Most of the jobs were in the private sector, fairly evenly distributed between full-time and part-time jobs. Two sectors; manufacturing and health care; were responsible for most of the gains, with 22,000 jobs added in the former and 21,000 in the latter. “With the U.S. economy showing clear signs of improvement, this is perhaps a sign that the Canadian non-energy economy is finally beginning to shift into a higher gear, aided by the lower Canadian dollar,” said David Madani, an economist with Capital Economics in Toronto. “We still think that the worst effects of this aren’t over, and still expect the economy to grow at a fairly unspectacular pace over the rest of the year,” he said. The 59,000 figure is much stronger than the 10,000 new jobs expected by a consensus of economists polled by Bloomberg.

 

Market Update as of June 5 2015

The TSX closed at 14957, down -77 points or -0.51% over the past week. YTD the TSX is up 1.38%.

The DOW closed at 17850, down -161 points or -0.89% over the past week. YTD the DOW is up 0.10%.

The S&P closed at 2093, down -14 points or -0.66% over the past week. YTD the S&P is up 1.70%.

The Nasdaq closed at 5069, down -1 points or -0.02% over the past week. YTD the Nasdaq is up 7.24%.

Gold closed at 1171, down -19.00 points or -1.60% over the past week. YTD gold is down -0.09%.

Oil closed at 58.88, down -1.54 points or -2.55% over the past week. YTD oil is up 11.75%.

The USD/CAD closed at 1.243424, down -0.0008 points or -0.07% over the past week. YTD the USD/CAD is up 5.95%.

 

Sources: Bloomberg; Investment Executive; advisor.ca

Terry Broaders

Weekly Update June 2 2015

 

“We Do Not Remember Days, We Remember Moments” -Cesare Pavese

 

Markets Pull Back on GDP Data

North American stock markets closed in the red in a decline that followed the release of disappointing economic growth figures on both sides of the border. The S&P/TSX composite index finished the last trading day of May down 92.91 points at 15,014.09, with the energy sector helping to limit the damage as oil prices turned sharply higher. The loonie lost 0.01 of a U.S. cent to 80.41 cents. Statistics Canada says the economy contracted at an annual pace of 0.6 per cent in the first three months of the year as weaker oil prices had a more severe impact than economists expected. It is the first time real GDP growth has dipped below zero since the fourth quarter of 2011 and the biggest slide into negative growth since the second quarter of 2009.

The U.S. economy also contracted in the first quarter with gross domestic product weakening 0.7 per cent, far worse than the government’s initial estimate of growth of 0.2 per cent. The Dow Jones industrial average closed down 115.44 points at 18,010.68, while the Nasdaq fell 27.95 points to 5,070.03 and the S&P 500 declined 13.40 points to 2,107.39. In commodities, oil prices got a boost after data showed U.S. crude oil inventories declined more than anticipated. The July crude contract rose $2.62 to US$60.30 a barrel and the energy sector rose 0.60 per cent. Meanwhile, August gold gained $1 to US$1,189.80 an ounce.

 

10% Plan To Max Out TFSAs

Ten percent of Canadians surveyed in a new poll say they typically contribute the maximum amount to their TFSA and will now invest $10,000. The poll done for CIBC found an additional 17% said they will try to increase their contributions above $5,500. The federal government increased the annual contribution limit to $10,000 as part of the budget this year. The increase in the TFSA contribution limits was promised by the Tories in the last election. As part of the increase, however, the limit will no longer increase with inflation. The poll also found that roughly 34% of respondents said they either didn’t have the money to take advantage of the new $10,000 limit or had other investment plans. Breaking the figure down, 18% of those surveyed said they would probably contribute less than the old limit of $5,500, while 12% said they would not have enough savings this year to make a contribution. Four% said they would contribute to other saving plans.

Twenty percent of those responding did not have a TFSA account and had no plans to open one, while 7% said they were now looking into opening one. Another 10% said they didn’t know, while 2% were categorized as other. The online survey was conducted between April 30 and May 4, less two weeks after the federal budget announcement. It included 3,011 Canadian adults who are Angus Reid Forum panelists.

 

Market Update as of May 29 2015

The TSX closed at 15034, down -167 points or -1.10% over the past week. YTD the TSX is up 1.90%.

The DOW closed at 18011, down -221 points or -1.21% over the past week. YTD the DOW is up 1.00%.

The S&P closed at 2107, down -19 points or -0.89% over the past week. YTD the S&P is up 2.38%.

The Nasdaq closed at 5070, down -19 points or -0.37% over the past week. YTD the Nasdaq is up 7.26%.

Gold closed at 1190, down -14.00 points or -1.16% over the past week. YTD gold is up 1.54%.

Oil closed at 60.42, up 0.70 points or 1.17% over the past week. YTD oil is up 14.67%.

The USD/CAD closed at 1.244265, up 0.0157 points or 1.28% over the past week. YTD the USD/CAD is up 6.03%.

Sources: Bloomberg, CIBC, advisor.ca, Investment Executive