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Frank Mueller

Weekly Update – September 15, 2017

“An investment in knowledge pays the best interest” – Benjamin Franklin

TSX Flat to Finish the Week

The Toronto Stock Exchange’s S&P/TSX composite index 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.

5 of the main 10 sectors were up on the day, and 5 were down.

The Loonie was flat against the Greenback at 82.08 cents USD as of 2:27pm PST, a modest rise of 8 basis-points compared to last week’s finish of 82 cents even.

Light, Sweet Crude Oil Barrel futures dropped 6 cents USD to finish at $49.83 USD.

Gold dropped for the week – and on Friday, by $5.80 USD per ounce – to finish the week at $1,323.50 USD, down 2.0% from last week’s $1,351 USD finish.

Southern United States Pick Up the Pieces Following Hurricane Irma, Wall Street Continues Ascent

Tropical Storm Harvey and Hurricane Irma have now come and gone, and many Southern US states are picking up the pieces.

On Wall Street, the S&P 500 rose by 4.59 points (0.18%) to finish Friday just above the 2,500 mark at 2,500.21. The Dow Jones Industrial Average (DJIA) rose by 0.29% to 22,268.34. The NASDAQ also posted a gain on the day, rising 19.38 points (0.3%) to finish at 6,448.47.

All three of the NASDAQ, the DJIA and the S&P 500 hit all-time intraday highs on Friday.

Wall Street appeared somewhat indifferent to reports of a drop in US retail sales – at least partially due to the two storms battering the southern states – as well as a drop in industrial output, the first since January. Indeed, US stocks have shrugged off multiple potential economic headwinds in 2017, including rising rates, tropical storms, political turmoil in the White House, President Trump’s seeming inability to pass largely pro-Republican key items of interest (such as Healthcare reform), and of course, North Korea.

North Korea Tests Another Missile Over Japan, Wall Street Indifferent

The North Koreans testfired yet another missile over Japan. The missile test was the second in as many weeks. However, while global leaders have been quick to denounce the North Koreans’ aggressive posturing, the US markets continue to hum, with focus more squarely on the Federal Reserve’s coming meeting next week (on September 19th & 20th).

Sources: Globe Advisor, Advisor.ca

Frank Mueller

Weekly Update – September 8, 2017

“Every day is a good day to be alive, whether the sun’s shining or not” – Marty Robbins

Bank of Canada Raises Overnight Rate to 1.00%, TSX Drops for Fifth Straight Day

The Toronto Stock Exchange’s S&P/TSX composite index continued its retreat on Friday. On the day, the TSX finished down 39.21 points (0.26%), dipping below 15,000 in the process to settle at 14,985.32. 6 of the 10 main index sectors dropped for the day.

For the week, the TSX was down 207 points, or 1.36%, from last week’s finish of 15,191.60.

The week’s big news came on the Bank of Canada announcement to raise the overnight rate by 25 basis points to 1.00%. You can read a bit more about the announcement here.

The announcement – as expected – pushed the Loonie higher against the Greenback, finishing the week at an even 82 cents, up 1.32 cents (1.63%) for the week. The Loonie is now at its highest mark against the US Dollar since May 2015.

Gold finished higher this week, as investors move to safe haven assets, rising to $1,351 (USD) per ounce.

Hurricane Irma Threatens Southern States, Geopolitical Concerns Add to Worries

On the heels of Tropical Storm Harvey comes Hurricane Irma, expected to hit Florida on Sunday. Irma is one of the most powerful Atlantic storms (if not THE most powerful) in over a century. Investors are taking caution, as Irma’s damage and destruction could be catastrophic.

The S&P 500 ended lower on Friday; however, the Dow Jones Industrial Average (DJIA) managed to finish in positive territory, with a modest 13.01 point (0.06%) gain. The NASDAQ was down 37.68 points, or 0.59%.

North Korea tested another nuclear missile this week, their 6th such test. South Korea is bracing for another possible missile test on Saturday. This situation, coupled with the repeated storms hitting the U.S., to say nothing of the intense flooding and storms in Southeastern Asia, has pushed concerns onto the trading floor. Many major markets across the world finished down for the week.

Major Markets Year-To-Date (YTD)

North America
The TSX closed at 14985, down -207 points or -1.36% over the past week. YTD the TSX is down -1.91%.
The DOW closed at 21798, down -190 points or -0.86% over the past week. YTD the DOW is up 10.30%.
The S&P closed at 2461, down -16 points or -0.65% over the past week. YTD the S&P is up 9.92%.
The Nasdaq closed at 6360, down -75 points or -1.17% over the past week. YTD the Nasdaq is up 18.15%.
Gold closed at 1351, up 23.00 points or 2.35% over the past week. YTD gold is up 18.72%.
Oil closed at 47.58, up 0.29 points or 0.61% over the past week. YTD oil is down -8.89%.
The USD/CAD closed at 0.8229, up 0.0147 points or 1.82% over the past week. YTD the USD/CAD is up 10.92%.

Europe/Asia
The MSCI closed at 1965, down -1 points or -0.05% over the past week. YTD the MSCI is up 12.09%.
The Euro Stoxx 50 closed at 3448, up 4 points or 0.12% over the past week. YTD the Euro Stoxx 50 is up 4.77%.
The FTSE closed at 7378, down -61 points or -0.82% over the past week. YTD the FTSE is up 3.29%.
The CAC closed at 5114, down -9 points or -0.18% over the past week. YTD the CAC is up 5.18%.
DAX closed at 12304, up 161.00 points or 1.33% over the past week. YTD DAX is up 7.17%.
Nikkei closed at 19275, down -417.00 points or -2.12% over the past week. YTD Nikkei is up 0.84%.
The Shanghai closed at 3365, down -2.0000 points or -0.06% over the past week. YTD the Shanghai is up 8.41%.

Fixed Income
The 10-Yr Bond closed at 2.06, down -0.1000 points or -4.63% over the past week. YTD the 10-Yr Bond is down -15.92%.

Sources: Dynamic Funds, Thomson Reuters DataStream, Globe Advisor, BNN, Advisor.ca

Frank Mueller

Weekly Update – September 1, 2017

“The Investor, unlike the Speculator, does not have to worry too much about the short term” – John Train

Broad Retreat Leads TSX Lower

The Toronto Stock Exchange’s S&P/TSX composite index continued its recent trend of staying relatively flat. On Friday, the TSX finished down 20.27 points, or 0.13% to finish at 15,191.60. 9 of the 10 main index sectors dropped on Friday. Only the energy sector finished in positive territory on Friday. Within the financial sector, positive movers included Toronto-Dominion Bank, Canadian Western Bank and Alaris Royalty Corp all advancing.

The Canadian Dollar gained for the week, and rose 63 basis points to finish at 80.68 cents (USD).

Surprisingly, given the goings on in Texas with Tropical Storm Harvey, West Texas Intermediate (WTI) finished down for the week at $47.35 (USD) per barrel, though it did rise Friday by 26 cents.

Spot Gold rose to a 10-month high to close at $1,324.46 USD per ounce on Friday after U.S. job growth numbers slowed in August. Gold Futures finished with a 0.6% gain, at $1,330.40 per ounce.


Tropical Storm Harvey Hammers Texas and North Korea Test Missile Launch – Wall Street Relatively Unchanged

Tropical Storm Harvey touched down in Texas late last week, and the city of Houston is almost entirely flooded. On Monday, energy and bank shares dropped, as the Harvey pummelled a key American energy hub; however, Wall Street, by-and-large, was unaffected.

Crude oil was heavily pressured this week, with flooding and damaging from Harvey forcing a shutdown of more than 20 per cent of U.S. refineries, curbing demand for oil, while raising the risk of fuel shortages. On a positive note, Harvey appears to be losing steam as it moves inland.

On Thursday, U.S. stocks and Treasury prices were pushed higher on economic data showing U.S. inflation rose at its lowest pace since late-2015. This news boosted expectations that the Federal Reserve will hold off on rate hikes during the remainder of 2017.

In global news, North Korea fired a test missile over Japan’s Hokkaido Island on Tuesday, leading to a sharply down open, but U.S. markets rebounded throughout the day as concern over North Korea quickly faded. While U.S. President Donald Trump did say “all options are on the table” when dealing with the North Korean threat, his focus has primarily been on Tropical Storm Harvey; this likely helped ease U.S. markets’ worries.

The MSCI’s World Index, on the other hand, tracked international worries to North Korean missile test. The World Index, which tracks 46 countries, was down 0.29% on Tuesday.

Strong Canadian GDP Data Could Lead to September Rate Hike

The Canadian economy exceeded growth expectations during Q2, with an annualized growth rate of 4.5%. According to Statistics Canada, 2017 has seen the best start to a calendar year since 2002.

Exports – mainly energy products – and household spending were the main factors leading to the real GDP increase. For the first half of the year, the Canadian economy grew by an annualized 4%, a “stunning” figure, according to National Bank senior economist Krishen Rangasamy, who added “(we need) to go back to 2011 to see such a strong semester of growth”.

Mr. Rangasamy said that an increase in real disposable income helps to explain the surge in household spending.

The Bank of Canada (BoC) has 3 more rate announcement dates scheduled for 2017: September 6, October 25, and December 6. Avery Shenfeld, chief economist at CIBC Capital Markets, believes that the Q2 economic data may lead the BoC to announce a rate hike next week (September 6th). Analysts initially felt that the October 25th announcement would be the likely date to announce a rate hike, but the strong Q2 economic data may have pulled in the timing to the September announcement.

A further rate hike would likely lead to an appreciation of the CAD versus the USD.

Sources: Thomson Reuters DataStream, Globe Advisor, BNN, Advisor.ca

Frank Mueller

Weekly Update – August 11, 2017

“Genius is a short memory in a bull market” – J.K. Galbraith

TSX Drops on Financial & Telecom Selloff

The Toronto Stock Exchange’s S&P/TSX composite index ended Friday down 40.87 points, or 0.27% to finish the week at 15,033.38. For the week, the TSX was down 224.59 points, or 1.47%, from last week’s close of 15,257.97.

The decline was broad, with 6 of the TSX’s main 10 groups posting losses on the day. In particular, the Financials group dropped 0.4%, and the Telecoms group was pulled down by some lower-than-expected earnings from major telecom company Telus.

The Materials group lost 0.6% on Friday, but the Energy group was relatively flat.

Oil prices sagged this week, with a barrel of West Texas Intermediate crude oil falling 1.5% for the week, while Brent crude oil dropped by 0.6% this week. Although U.S. crude inventories fell by 6.5 million barrels, analysts were quick to point out the seasonality of the decline.

The Loonie rose by 47 basis points to finish the week at 78.91 cents against the Greenback, though on the week, the Loonie suffered a slight drop versus last week’s finish of 79.02 cents.
Gold rose to $1,296.60 USD per ounce on Friday, up 3.35% for the week.

Tensions with North Korea Weigh on Stock Markets

Increasingly aggressive posturing by the North Korean and U.S. leaders had an impact on the markets this week, with most U.S. indexes posting losses from Tuesday through Thursday, before a small rally on Friday.

Earlier in the week, President Trump threatened to “unleash fire and fury” upon North Korea. The North Korean dictatorship responded in kind by threatening to launch a missile at Guam, a U.S.-held territory in the Pacific Ocean. Today, Trump tweeted that “Military solutions are now fully in place, locked and loaded, should North Korea act unwisely”.

The U.S. markets were also affected by soft inflation figures, and analysts pointed out that the U.S. Federal Reserve may act more cautiously toward further rate increases in the near future, a positive piece of news for equity investors. Reuters has reduced the odds of a December rate hike to 28%, down from 46% as of last week.

The inflation numbers did have a downward pull on the Greenback, as it lost ground against many foreign currencies.

The S&P 500 Volatility Index (VIX) hit 9-month highs in the wake of the North Korean/U.S. tensions.

Sources: Thomson Reuters DataStream, Globe Advisor