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TSX Slips Amid Solid RBC Results

The Toronto stock market closed lower Friday as the financial sector failed to find lift from record earnings at Canada’s biggest bank. The S&P/TSX composite index dropped 20.54 points to 15,535. The RBC profit amounted to $1.64 per share, eight cents ahead of estimates. The other major Canadian banks report next week and “it’s set up for them pretty well to make some money,” said Gareth Watson, vice-president, investment management and research, Richardson GMP.  The Canadian dollar was unchanged at 91.37 cents US as the consumer price index declined 0.2 per cent month over month in July and retail sales for June jumped 1.1%. U.S. markets were mainly lower as U.S. Federal Reserve chairwoman Janet Yellen offered no signal that she’s altered her view that the economy still needs Fed support from interest rates that have been near zero since the financial crisis. The Dow Jones industrials fell 38.27 points to 17,001.22, while the Nasdaq gained 6.45 points to 4,538 and the S&P 500 index edged 3.97 points lower to 1,988.


RBC Says Rising Interest Rates Would Cool Housing Market

RBC Economics says higher interest rates will put a strain on the Canadian housing market in 2015 and “substantially” moderate prices increases. In its latest Canadian housing forecast, the bank says Canada’s current historically low interest rates are not “sustainable” and it forecasts longer-term interest rates will rise by the end of the year in anticipation of a return to tightening mode by the Bank of Canada in 2015. RBC says if current rates rise, it anticipates home resales to fall by 0.9% to 463,100 units next year following an increase of 2.1% to 467,200 units in 2014, while it sees home prices increasing just 1.1% in 2015, compared with a jump of 4.3% this year. RBC describes those developments as a cooling not a crash in the housing market, which is supported by a variety of other factors, including steady immigration rates and good employment outlook. The report said condo construction, particularly in the major cities, will be one of the main reasons the housing market will slow in 2015 as more units become available. It cautioned that although there will be slowdown in 2015, the big impact on the Canadian housing market will be likely not be seen until 2016 once higher interest rates are “normalized.”

Market Update as of August 22 2014

The TSX closed at 15536, up 232 points or 1.52% over the past week. YTD the TSX is up 14.05%.

The DOW closed at 17001, up 338 points or 2.03% over the past week. YTD the DOW is up 2.56%.

The S&P closed at 1988, up 33 points or 1.69% over the past week. YTD the S&P is up 7.58%.

The Nasdaq closed at 4539, up 74 points or 1.66% over the past week. YTD the Nasdaq is up 8.67%.

Gold closed at 1281, down -25.00 points or -1.91% over the past week. YTD gold is up 6.40%.

Oil closed at 93.57, down -3.45 points or -3.56% over the past week. YTD oil is down -5.11%.

The USD/CAD closed at 1.09456, up 0.0050 points or 0.46% over the past week. YTD the USD/CAD is up 2.95%.


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