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Category Archives: The Markets

Terry Broaders

Weekly Update February 24 2015

“Prejudices Are What Fools Use for Reason” -Francois-Marie Arouet, aka Voltaire

 

TSX Little Changed As Greece Secures Bailout Extension

The Toronto stock market closed little changed Friday amid relief that Greece and its eurozone partners had agreed to extend by four months the bailout loans that have kept the country afloat. The S&P/TSX composite index declined 8.09 points to 15,172.24. In return for the extension, Greece committed not to pursue any “unilateral” measures that might affect the country’s budget targets. Greece has committed to provide a list of reforms based on its current bailout program for assessment on Monday. The Canadian dollar moved down 0.3 of a U.S. cent to 79.71 cents as Statistics Canada reported retail sales slid 2.1 per cent in December to $42.1 billion, the largest decline since April 2010. New York’s Dow Jones industrials jumped 154.67 points to 18,140.44, the Nasdaq gained 31.27 points to 4,955.97 and the S&P 500 index was up 12.85 points to 2,110.3. Oil prices continued to lose ground on data showing high supply levels in the U.S., down $1.02 to US$50.81 a barrel.

 

Working Canadians Worried About Running Out of Money in Retirement

More than half of working Canadians are uncertain whether they have the knowledge to plan for retirement, according to a Sun Life Financial Inc poll. While 47% of Canadians surveyed feel they have the knowledge to plan their retirement, 53% are unsure of whether they know enough to plan for their retirement. People have doubts regarding retirement, with 41% feeling they lack sufficient knowledge regarding how much retirement income they will need. Also, 37% are unaware of how taxes will affect their retirement savings and income. Only half of Canadians are able to state how many years of retirement they expect to have. Despite this lack of certainty, only 22% of Canadians have a written financial plan and only 33% work with a financial advisor. More than one-third of working Canadians believe they risk running out of money in retirement, as opposed to one in seven retirees who feel the same.

For the first time since Sun Life Financial began the survey, the number of Canadians who expect to be working full time past the age of 65 has now surpassed those who believe that they will be fully retired. This number has grown over the past seven years as three out of five Canadian workers now expect to work either full time or part time when they retire. When working Canadians were asked the top reason as to why they expect to be working past traditional retirement age, 21% said it was to earn enough money to pay basic living expenses; 18% of Canadians, don’t believe that government pensions will suffice and 16% would like to earn enough money to live well. The survey was conducted by Ipsos Reid between Dec. 5 and 22, 2014. A sample of 3,000 Canadians between the ages of 30 and 65 were interviewed online.

 

Market Update as of February 20 2015

The TSX closed at 15171, down -99 points or -0.65% over the past week. YTD the TSX is up 2.83%.

The DOW closed at 18140, up 121 points or 0.67% over the past week. YTD the DOW is up 1.72%.

The S&P closed at 2110, up 13 points or 0.62% over the past week. YTD the S&P is up 2.53%.

Terry Broaders

Weekly Update February 17 2015

“I Am a Proud Non-Reader of Books” -Kanye West

 

TSX Posts Highest Close In Almost 5 Months

The Toronto stock market advanced for a fifth straight session Friday amid data showing solid economic growth in Europe and an unexpectedly strong performance by Canadian manufacturers. The S&P/TSX composite index was ahead 36.29 points to 15,264.81, its highest close in almost five months.  The Canadian dollar rose 0.19 of a cent to 80.25 cents US as Canadian manufacturing sales rose 1.7 per cent in December. That was far higher than the 0.5% reading that economists had expected. New York indexes were positive despite slipping consumer confidence. The University of Michigan’s consumer confidence index came in at 93.6 in February, lower than the 98.5 reading that economists expected.  The Dow Jones industrials was ahead 46.97 points at 18,019,35, the Nasdaq gained 36.23 points to 4,893.84 and the S&P 500 index was up 8.51 points at 2,096.99. The German economy grew by 0.7% in the fourth quarter, much better than the 0.3% increase that had been expected. Overall economic output across the eurozone was 0.3% higher in the quarter compared with the previous three months. That equated with an annualized growth rate of just 1.2%, but still better than the 0.2% increased anticipated by investors.  The TSX found support from the energy sector, up 0.9% as March crude advanced $1.57 to US$52.78 a barrel. The TSX gained 181 points or 1.2% this week, its fourth straight weekly gain.

 

Worst Ways To Quit a Job

How you quit a job can impact your future career opportunities, finds a new survey by OfficeTeam.  The survey was developed by OfficeTeam, a leading staffing service. It was conducted by an independent research firm and is based on telephone interviews with more than 600 HR managers in the United States and Canada. The vast majority (86%) agreed resigning in an unprofessional manner can either greatly affect or somewhat impact people’s reputations and ability to impress prospective employers. Typically, most people resign by informing their managers and giving notice. However, many of the HR managers surveyed gave examples of employees they’ve dealt with who’ve preferred to leave bigger impressions.

For example, one manager noted an employee once baked and delivered a cake that had her resignation letter written top, while another recalled one staffer who hired a marching band to accompany him as he announced he was quitting. One worker threw a cup of coffee and walked out.  In some cases, employees preferred to go more quietly by relying on email, text or Facebook messages. And in one case, an HR manager recalled receiving a Post-It note from a departing staffer. Whichever way you choose to quit a job, your goal should always be to make sure you’re leaving on the best terms possible, says Robert Hosking, executive director of OfficeTeam. “Doing a great job when you start a new role is expected, but doing a great job as you leave can cement your reputation” as a professional. He adds, “It’s best to schedule a meeting with your manager to discuss your resignation, and give notice.” It’s also key to keep conversations positive and offer to train your replacement if possible.

 

BLOG LINKS

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Market Update As Of February 13 2015

The TSX closed at 15270, up 186 points or 1.23% over the past week. YTD the TSX is up 3.50%.

The DOW closed at 18019, up 195 points or 1.09% over the past week. YTD the DOW is up 1.04%.

The S&P closed at 2097, up 41 points or 1.99% over the past week. YTD the S&P is up 1.90%.

The Nasdaq closed at 4894, up 150 points or 3.16% over the past week. YTD the Nasdaq is up 3.53%.

Gold closed at 1228, down -6.00 points or -0.49% over the past week. YTD gold is up 4.78%.

Oil closed at 52.74, up 0.70 points or 1.35% over the past week. YTD oil is up 0.09%.

The USD/CAD closed at 1.246032, down -0.0065 points or -0.52% over the past week. YTD the USD/CAD is up 6.18%.

 

Sources: Bloomberg; Investment Executive; advisor.ca; Office Team

Odette Morin

Three main reasons why Markets are volatile

  1. The end of QE in the U.S is in sight. So it’s natural to expect some volatility as this unfolds gradually.
  2. The price of oil dropped unexpectedly in a big way. When unexpected events occur, the markets react.  The price of oil is expected to come back to the more normal level of $80 a barrel within a few quarters.
  3. Global Growth is slowing.  We have seen tremendous growth in the past 3 years following the financial crisis. The recovering economies are still expected to grow but at a more moderate level.  Any type of slow down affects the markets.

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. Learn to live with market volatility by focusing on your investment earnings yield instead of your investment market value.

Terry Broaders

Weekly Update January 27 2015

“I Love The Rain! It’s My Favourite Weather ! ” -Kristen Wiig

 

Energy and Consumer Staples Send TSX Modestly Higher

The Toronto stock market closed slightly higher Friday as consumer stocks advanced in the wake of a strong retail report and energy stocks climbed amid questions about whether the death of Saudi Arabia’s King Abdullah could mean a change in the amount of oil his country is producing.
The S&P/TSX composite index gained 15.37 points to 14,779.35, with the consumer staples section ahead 0.9 per cent as Statistics Canada reported retail sales rose 0.4 per cent to $43 billion in November. Economists had generally expected a decline. Statistics Canada also reported that the effects of the global oil slump weighed on Canadian inflation last month as falling pump prices helped slow the annual rate to 1.5 per cent, a deceleration from two per cent in November. On Friday, Statistics Canada’s latest consumer price index found gasoline prices in December fell 16.6 per cent compared with the previous year, which followed the year-over-year November decline of 5.9 per cent.

 

Canada Revenue Agency Gets ‘C’ Grade From Small Business

The CRA is getting better, but most small business owners wouldn’t know it, according to the Canadian Federation of Independent Business’ (CFIB) CRA Report Card. The majority of small business owners and tax practitioners surveyed support recent changes at the agency, but still give the taxman a “C” grade. “Paying taxes is not something that anyone looks forward to, but dealing with the CRA can be especially painful for small business owners,” said Corinne Pohlmann, senior vice president, National Affairs, at CFIB. Most small business owners are unaware of the agency’s recent service improvements: liaison officer initiative (8% aware); commitment to honour advice given online through my business account (16% aware); call agents required to provide their i.d. numbers (38% aware).
Overall, 55% of small business owners still feel that CRA treats them like they’ve done something wrong, and 54% think the agency needs to improve the clarity and quality of information it provides. When told about the above service improvements from CRA, an overwhelming majority of small business owners and tax practitioners were supportive (over 80%), suggesting that improved awareness would make a difference in the way small business owners perceive the agency.

 

BLOG LINKS

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Market Update As Of January 23 2015

 The TSX closed at 14791, up 482 points or 3.37% over the past week. YTD the TSX is up 0.25%.

The DOW closed at 17673, up 161 points or 0.92% over the past week. YTD the DOW is down -0.90%.

The S&P closed at 2052, up 33 points or 1.63% over the past week. YTD the S&P is down -0.29%.

The Nasdaq closed at 4758, up 124 points or 2.68% over the past week. YTD the Nasdaq is up 0.66%.

Gold closed at 1293, up 15.00 points or 1.17% over the past week. YTD gold is up 10.32%.

Oil closed at 45.44, down -3.69 points or -7.51% over the past week. YTD oil is down -13.76%.

The USD/CAD closed at 1.243073, up 0.0447 points or 3.73% over the past week. YTD the USD/CAD is up 5.92%.

 

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

Odette Morin

Market commentary: Where are we headed in 2015?

The S&P/TSX Composite Index rallied into the final months of 2014, but collapsing oil prices led to a sharp selloff by year end.

As we head into 2015, the global economy continues to slowly expand. Although interest rates remain low, there are some indications that rates, at least in North America, could begin to move higher in the coming year. The key question for 2015 is whether the U.S. economy can continue to grow against the backdrop of a global slowdown. Investors will also need to weigh the impact of the strengthening U.S. dollar against falling energy prices. In the face of slower growth, interest rates are no longer expected to rise significantly. Nonetheless, the Fed is expected to begin rising rates during the second half of the year, which is expected to give continued strength to the US dollar. Should, however, the US economy succumb to slower growth, expectations for impending rate hikes might subside, resulting in a slip in the dollar’s value and possibly providing support to oil prices.

Nearly six years after the financial crisis, equities have delivered generally positive results, but markets are cyclical, and it is always difficult to predict their direction in any given year. While the sharp drop in oil prices has weighed on the Canadian equity market in particular, it is important to remember that asset classes, industry sectors and geographic markets often move in divergent directions. Lower oil prices, for example,can be positive for other sectors as they strengthen consumer confidence and reduce costs for manufacturers, transportation companies and related industries.

In our view, recent market events support the case for maintaining a portfolio that is well diversified across asset classes, geographical areas and industry sectors. Diversification will help to maximize returns for your portfolio, while mitigating risks as they occur, including currency and interest rate movements.

We work hard to develop the portfolio that best reflects your long-term financial goals and tolerance for risk. Should you have questions about your investments or any other issue, please feel free to give me, Terry or Anthony a call. We wish you all the best in 2015.

oil drop

 

Odette Morin

Large Drops in the Canadian Market lead by the Drop of Oil – What is causing this?

oil drop

 

 

 

 

 

 

 

Energy markets have been in turmoil since the OPEC announcement Wednesday last week that the group would not be cutting production. Although it was widely expected that OPEC would not take any production cuts at the meeting, the markets’ reaction to the actual announcement was drastic with oil prices declining 7% that day and continuing to slide to the now below $60. The tone of the market has shifted dramatically and there are talks about the possibility of $60-70ish oil for the next 6-9 months if not longer. The fundamental issue is that the oil market is oversupplied.

The vast majority of Energy sector experts’ comments this week indicate that OPEC will likely revisit its stance on production cuts over the next 6-9 months. “For many OPEC members, including Libya, Iraq, Algeria, and Venezuela, $60-70 oil poses a huge problem. The majority of OPEC countries need $90+ Brent oil prices in order to fund their social programs and are at high risk of social instability if these programs are cut. Even Saudi Arabia, which has significant foreign currency reserves to cover any shortfall in revenues has a huge population to support and high committed program costs which would eat through those reserves quickly at current oil prices (according to the IMF). “ wrote the BMO Energy sector team this week. (1)

“We continue to believe that the marginal cost of the majority of new oil production (full-cycle) is north of $80. Oil is a depleting resource and, over time, oil prices must migrate back to the marginal cost of supply in order to support new production. However, that does not mean that oil cannot trade below marginal cost for a period of time. We would expect that supply/demand fundamentals will improve through the back half of 2015 and become more balanced as we move into 2016. However, the oil market is complex and highly unpredictable and conditions can change very quickly. The imbalance in the market is not huge and history has taught us that supply disruptions are common. “ (1)

The Franklin Templeton Energy Sector team wrote a similar analysis this week. They too believe that low oil prices are not here to stay for the long term. “The marginal barrel-of-oil production growth cannot be profitably brought to market in the current oil price environment by private industry, nor can OPEC members balance their budgets, in our view necessitating higher prices in the future. In the short term, we may see various energy companies contend with low oil prices through a combination of reduced capital spending, asset dispositions and adjustments to dividend levels as necessary. “ (2)

To put things into perspective, from December 2nd to December 9th, 2014, the TSX has dropped 2.9%; while for the same period our average client account has dropped 0.9% or less. So highly diversified managed funds are doing better now of course.  Even if the Canadian Market took a big hit, your portfolios would not.

Take a look at the recent results of different sectors. This clearly shows the benefit of diversification.

see the chart here

(1)BMO Energy Sector team Commentary Dec 7, 2014

(2)Franklin Templeton Bissett Energy Sector team Commentary Dec 10, 2014