Weekly Newsletter

Market Watch



The big picture

How low will they go?



There is room for the European Central Bank (ECB) to cut rates again, but 1.00% is the lowest it should go, said Austrian central banker Ewald Nowotny on Monday in an interview with Reuters. However, the very next day, Georgios Provopoulos of the Bank of Greece told Bloomberg News that both the IMF and OECD are expecting a deeper recession in Europe than current projections from the ECB, and that he does not see 1.00% as a rate “threshold” that shouldn’t be crossed.



The Reserve Bank of Australia—previously a holdout in the global rate-cutting derby—finally cut its cash rate by a quarter point to 3.00% on Tuesday. Closer to home, the latest Federal Open Market Committee meeting minutes were released Wednesday, and were widely interpreted as indicating that the Fed will continue to expand its balance sheet, possibly by extending the plan announced last month to purchase $300 billion in bonds.



China is likely to emerge from its economic slump this year, the World Bank said Tuesday. “A recovery in China—fuelled largely by the country's huge economic stimulus package—is likely to begin this year and take full hold in 2010, potentially contributing to the region's stabilization, and perhaps recovery,” the bank said in a statement.



The markets

GM pursues innovation as bankruptcy looms



Markets gave up some of the record gains from last month as the first quarter earnings season kicked off with aluminum giant Alcoa announcing a hefty quarterly loss of US$497 million. In other market news, Pulte Homes said it is buying Centex in a deal that includes USD$1.3-billion in stock and USD$1.8-billion in debt to create America’s largest home-building company.



General Motors said it is teaming up with Segway, maker of the upright, self-balancing scooters, to build a new type of two-wheeled vehicle designed to move easily through congested urban streets. The machine, which GM says it aims to develop by 2012, would run on batteries. Even as GM works to reinvent itself, a source close to the company said on Tuesday that preparations for a possible bankruptcy filing have become "intense and earnest."



Our recommendation
Corporate bonds still offer value



· 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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Jeff Wareham
Wealth Advisor

ScotiaMcLeod
148 Fullarton Street,
Suite 1801
London, ON
N6A 5P3

Tel: (519) 660-3260
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Fax: (519) 660-3208
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Greg Holland
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Ann Martin
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