Weekly Newsletter

Market Watch


The big picture

U.S. housing reaches key affordability level



Canada has less need than other countries to boost its economy with unusual steps like printing money to buy assets, a Bank of Canada official said on Tuesday, hammering home the message that it has done enough to combat the recession. “Canada has not been subject to many of the imbalances and vulnerabilities that have affected other countries, and has had less need for unconventional measures,” Deputy Governor John Murray said in a speech in Philadelphia.



More Americans are warming to the idea of buying a home, according to a report from the University of Michigan. The trend is being driven in part by improved affordability, as the income required to buy a first home now has dropped below median family income for the first time in recent history. Overall U.S. housing construction starts and permits slumped to fresh lows in April; however, single-family homes, which make up the lion’s share of the U.S. housing market, saw a 3.6% rise in building permits and a 2.8% increase in new construction.



On Tuesday, a source familiar with General Motors’ ongoing restructuring bid said it is likely that the company’s healthy assets will be sold to a new company owned by the U.S. government. On Thursday, GM shares rose 32% on news that the troubled company has cleared a major obstacle in its restructuring, as the United Auto Workers agreed to cut labour costs and accept new terms for a $20-billion union retiree healthcare obligation.



The markets

Loonie takes flight



From its March 9th low of 76.53 cents (U.S.), the Canadian dollar has zoomed up more than 11 cents to touch 88 cents this week. The currency’s rise is largely tied to stronger energy prices, as oil struck a six-month high of $60.75 on Wednesday before pulling back on Thursday. Rising oil also helped spur resource stocks and the TSX higher on Tuesday and Wednesday.



Home Depot said this week that its first-quarter profit climbed 44%, and its number-two competitor, Lowe’s, further buoyed investors with a projection of higher second-quarter profits. In a sign of improving equity market confidence, Bank of America said it bolstered its balance sheet this week by raising a remarkable US$13.5 billion in a common share offering.



Our recommendation
Review goals and risk tolerance as markets move



· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, believes the current strength in equities is overdone and should be viewed as a bear market rally as opposed to the beginning of the next bull market. We continue to advocate that investors take profits in long trading positions or overvalued cyclical positions that do not represent long term, core holdings. In the event of an inevitable pull-back, return to selectively accumulating equities in anticipation of the next bull market for stocks.



· 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 significant volatility still a factor in the markets, it’s important to review the impact on your portfolio allocations and ensure that your holdings remain appropriate for your goals and risk tolerance.









Jeff Wareham
Wealth Advisor

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

Tel: (519) 660-3260
Toll Free: (800) 265-1242
Fax: (519) 660-3208
Email Jeff
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Greg Holland
Tel: (519) 660-3239
Email Greg

Ann Martin
Tel: (519) 660-3260
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