Weekly Newsletter

Market Watch



The big picture

Geithner plan met with yawn from Wall Street

On Tuesday, U.S. Treasury Secretary Tim Geithner unveiled the Obama administration's highly anticipated plan to fix the financial markets. The reception from Wall Street was lukewarm at best as analysts and investors alike were hoping for bolder measures and more details. Arguably the greatest disappointment in the plan, which many had the highest hopes for, was the creation of a so-called "bad bank" to buy troubled assets and get them off of bank balance sheets in the process. Secretary Geithner is now poised to discuss the plan at this weekend’s G-7 summit in Rome. No doubt much of the conversation amongst the legions of representatives from the world’s seven largest industrialized economies will be centred on the “buy American” clause in the stimulus package, which has sparked concerns over U.S. economic protectionism.

This week Bank of Canada (BoC) Governor Mark Carney said the central bank has plenty of flexibility to cut interest rates and expand liquidity operations if needed, possibly hinting at further rate cuts on March 3rd. Grilled by legislators on a parliamentary finance committee, Carney also defended his forecast for Canada's quick recovery from the current recession to growth of 3.8% next year, despite news that Canada has just recorded its first trade deficit in 32 years.

With falling commodity prices, lower interest rates and government stimulus packages approved, the major economies could begin to show signs of recovery by the end of this year. Speaking in an interview with France Culture radio on Saturday, European Central Bank Governing Council member Christian Noyer said, "…several factors make us think it's not unrealistic to imagine pulling out of recession by the end of the year."

The markets
U.S. manufacturing gets shot in arm

Considering the pace of plant closures, layoffs, bankruptcies and bailouts in recent months, it was significant news this week that computer chip giant Intel plans to invest $7 billion in U.S. manufacturing facilities over the next two years.

In a bid to compete with some of its more value-oriented peers, Starbucks announced on Monday that it is now selling discounted pairings of coffee and breakfast food in the U.S. for $3.95. Meanwhile here in Canada, even as many retailers are struggling with the impact of the economic downturn on consumer spending, Shoppers Drug Mart reported a 14.4 percent jump in quarterly profit on Thursday, and said it saw sales rising through 2009, despite economic headwinds.

Our recommendation
Consider moving off the sidelines



· Equities. Economic statistics are anticipated to be at their worst over the next several months and Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group suggests that in response to any negative market reactions investors should be selectively building equity positions in quality companies to position portfolios for the next cycle.



· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, says high quality corporate bonds, such as Canadian banks and insurance companies, continue to offer attractive yields relative to government issues. Although credit spreads have tightened significantly, they still remain wide, and we recommend investors following the laddered portfolio process add exposure to these sectors when rolling maturities at this time.



· Portfolio strategy. With volatility still at record highs, it’s important to review the impact on your portfolio allocations and ensure that your holdings remain appropriate for your goals and risk tolerance.


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