Weekly Newsletter

Market Watch



The big picture

Harper confident GM will remain in Canada



The U.S. Federal Reserve sharply downgraded its outlook for the economy this year, forecasting a deeper contraction and an unemployment rate near 9% by the end of the year. Most officials also indicated that they don't expect unemployment to return to a normal rate of about 5% until at least 2012. The contraction of the U.S. housing industry accelerated in January, as construction on new U.S. housing units plunged 16.8% to by far the weakest levels since the World War II era. Meanwhile, the Obama administration announced a $75 billion plan on Wednesday that aims to aid as many as 9 million households in fending off foreclosures.



Earlier this week, Prime Minister Stephen Harper said he is not concerned about the possibility of General Motors moving out of Canada as the Detroit-based company restructures its operations. As part of the restructuring, GM will slash another 47,000 jobs and may discontinue its Hummer and Saturn brands, scale back Pontiac, and sell Saab. Harper expressed confidence that the federal and provincial governments will supply the necessary funding to maintain a strong auto industry in Canada.



In an interview on German radio earlier on Wednesday, European Central Bank Executive Board member Jürgen Stark said the government stimulus plans announced recently will help stabilize the European economy by the end of 2009.



The markets

Wal-Mart earnings higher than expected



New fears about the deepening global recession and increased talk of U.S. bank nationalizations sent markets from Tokyo to New York lower this week. During trading on Friday, the Dow fell to its lowest level since 1997. Meanwhile U.S. gold futures climbed above the psychologically important level of $1,000/ounce on Friday as nervous investors turned to the commodity as a safe haven amid tumbling stocks and economic uncertainty.



Wal-Mart said it's enjoying a rise in customer traffic as the world's largest retailer released better-than-expected fourth-quarter earnings Tuesday. Shares of Wal-Mart rose more than 3% on the news even as the Dow and other major indices lost ground. Rogers Communications shares fell during the week after posting quarterly results that were lower than expectations due to higher costs associated with increased smartphone subscriber additions. The company increased its dividend from $1.00 to $1.16, effective immediately.



Our recommendation
Corporate bonds still offer attractive yields



· 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.