The big picture
U.S. deficit looms as recovery takes hold
U.S. President Barack Obama nominated Ben Bernanke for a second term as Federal Reserve (the Fed) Chairman, praising him for leading the Fed through “one of the worst financial crises that this nation and this world has ever faced." The same day, a grim U.S. budget forecast US$9 trillion in additional debt over the next decade, up $2 trillion since the last forecast, because of plunging tax receipts, soaring spending and a sluggish recovery. U.S. consumer confidence rose unexpectedly in August after two consecutive months of declines. Consumer expectations of where the economy will be in six months rose to its highest level since the recession began in December 2007.
In Canada, retail sales jumped 1% from May to June, but remain 4.4% lower than a year ago. The Bank of Canada (the BoC) warned again that it is prepared to intervene to stop the sharp rise of the loonie from derailing the economic recovery. The BoC has not intervened in foreign exchange markets in more than 10 years.
All eyes will be on Japan this Sunday as voters take to the polls. Expectations are for the opposition Democratic Party to oust the ruling conservative Liberal Democratic Party for only the second time in its 54-year history.
Markets
Investors weigh issues
Markets were choppy as U.S. bank concerns undermined improving consumer confidence, jobless and housing data. In Canada, the Royal Bank reported record profits while earnings from the Bank of Montreal, TD Bank and the Bank of Nova Scotia also beat expectations.
As the iPhone prepares for its debut in China – the world’s largest cell phone market – Apple is investigating reports from France of iPhone screens exploding, apparently because of overheated lithium ion batteries. Meanwhile, analysts speculate that Apple is working on a new multimedia tablet that will let people access movies and TV, games, the Internet and books. Toyota will slash production by 580,000 vehicles – 6% of global capacity – despite capturing 19% of the 700,000 U.S. auto sales generated by the “cash for clunkers” program.
Our recommendation
Rebalance portfolios to buy low, sell high
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although the market may be overbought in the short term and subject to profit taking, we do not believe markets are overpriced. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Recall that September, on average, is historically the worst month for equity investors.
· Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Municipals, neutral on Provincials and Corporates. Currency Call – favour the C$, as well as the A$, which is expected to outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
· Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Saturday, August 29, 2009
look at all of your options if you are returning to the market
With August drawing to a close, markets continue to show remarkable resilience. The Dow has been up for eight straight days. Many investors still have a lot of cash on the sidelines, and cash is essentially earning nothing. In this environment, it may be very tempting to wade back in to the equity market. Despite the temptation, it makes sense to look at all of your options if you are returning to the market. Instead of rushing out and simply buying an equity mutual fund, why not consider some other alternatives, like bonds or preferred shares, as a complement to buying stocks. Before you get back in, give me a call.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Wednesday, August 26, 2009
Bank of Canada and the Soaring Loonie
Late yesterday, the Bank of Canada indicated it was ready to try to deal with a soaring loonie, which has surged both through the year, and through this decade. This likely means a lengthy period of low interest rates for Canadians. This should benefit both investors and Canadian businesses.. It also highlights one of the key risks to Canadian investors. A strengthening loonie really hurts Canadians who invest globally. When your stocks and bonds are denominated in a foreign currency, a rising loonie costs you money. If you are concerned about protecting your portfolio from a strengthening loonie, why not give me a call?
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Monday, August 24, 2009
Impact of fund management fees
Mutual funds remain one of the most popular investment vehicles for Canadians. With investors regaining confidence, money is likely to start flowing back into funds. If you have over 100,000 invested, and are considering adding to your mutual funds, remember that Canadians pay the highest fund management fees in the world, It is easy to overlook the impact of fund management fees in a rising market, but these fees have a dramatic impact on your long term investment return. Over the long term, management fees may cost you hundreds of thousands of dollars, and significantly reduce your rate of return. Why not get a second opinion?
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Friday, August 21, 2009
Wareham Weekly Insights
The big picture
China key to global recovery
The global economic recovery has begun, but sustaining it will require stepping up U.S. exports
to Asia, says the International Monetary Fund’s chief economist. In an IMF report, Olivier
Blanchard predicted that consumer spending, which accounts for 70% of the U.S. economy,
will not return to pre-crisis strength quickly. He called on China to reduce the trade imbalance
and import more goods from the U.S.
Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. The U.S. housing market showed encouraging signs in July. Although new-home construction and permits fell, single-family-home starts remained strong, rising 1.7% in July after a 17.8% surge in June. Sales of U.S. existing homes rose to their highest level in nearly two years as cheaper prices and the availability of tax credits continued to entice buyers. In Canada, inflation is at a 56-year low, with declines in the price of gas, cars and shelter partly offset by higher food costs. With consumer spending remaining weak, some economists say it could take two years of recovery before companies begin to raise prices.
Markets
Stocks tumble, then rebound
World markets rallied following steep losses on Monday, when fresh concerns about a U.S.
economic recovery sent indexes around the world tumbling. Stocks rose after a rebound in Chinese equities and an uptick in U.S. manufacturing offset a disappointing weekly jobs report.
Canada is not likely to block sale of Nortel, says the Globe and Mail, since the government is
only required to review foreign takeovers for businesses over $312 million – Nortel’s balance
sheet assets are $149 million. Oil is on track for a strong gain this week as the price per barrel approaches the highest levels since October 2008 when it closed at $75.22. The $US 3 billion
cash-for-clunkers program will shut down on Monday, the government said Thursday. As of Thursday, the program has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates. Meanwhile, Hyundai Canada will offer up to $1,000 on clunkers traded in for new
vehicles. Ten months after its initial rescue deal with UBS, Switzerland sold its 9% stake in its
largest bank for US$5.1 billion, making a profit of US$ 1.1 billion on its investment.
Our recommendation
Rebalance portfolios to buy low, sell high
Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Profit taking also would not be unexpected; recall that September, on average, is historically the worst month for equity investors.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommen-dations as follows: Term Call – below benchmark duration.
Sector Call – underweight Canadas, overweight Municiaps, neutral on Provincials and
Corporates. Currency Call – favour the C$, as well as the A$, which is expected to
outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets
Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
Privacy Policy and Legal Disclaimer
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
China key to global recovery
The global economic recovery has begun, but sustaining it will require stepping up U.S. exports
to Asia, says the International Monetary Fund’s chief economist. In an IMF report, Olivier
Blanchard predicted that consumer spending, which accounts for 70% of the U.S. economy,
will not return to pre-crisis strength quickly. He called on China to reduce the trade imbalance
and import more goods from the U.S.
Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression. The U.S. housing market showed encouraging signs in July. Although new-home construction and permits fell, single-family-home starts remained strong, rising 1.7% in July after a 17.8% surge in June. Sales of U.S. existing homes rose to their highest level in nearly two years as cheaper prices and the availability of tax credits continued to entice buyers. In Canada, inflation is at a 56-year low, with declines in the price of gas, cars and shelter partly offset by higher food costs. With consumer spending remaining weak, some economists say it could take two years of recovery before companies begin to raise prices.
Markets
Stocks tumble, then rebound
World markets rallied following steep losses on Monday, when fresh concerns about a U.S.
economic recovery sent indexes around the world tumbling. Stocks rose after a rebound in Chinese equities and an uptick in U.S. manufacturing offset a disappointing weekly jobs report.
Canada is not likely to block sale of Nortel, says the Globe and Mail, since the government is
only required to review foreign takeovers for businesses over $312 million – Nortel’s balance
sheet assets are $149 million. Oil is on track for a strong gain this week as the price per barrel approaches the highest levels since October 2008 when it closed at $75.22. The $US 3 billion
cash-for-clunkers program will shut down on Monday, the government said Thursday. As of Thursday, the program has recorded more than 457,000 dealer transactions worth $1.9 billion in rebates. Meanwhile, Hyundai Canada will offer up to $1,000 on clunkers traded in for new
vehicles. Ten months after its initial rescue deal with UBS, Switzerland sold its 9% stake in its
largest bank for US$5.1 billion, making a profit of US$ 1.1 billion on its investment.
Our recommendation
Rebalance portfolios to buy low, sell high
Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Profit taking also would not be unexpected; recall that September, on average, is historically the worst month for equity investors.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommen-dations as follows: Term Call – below benchmark duration.
Sector Call – underweight Canadas, overweight Municiaps, neutral on Provincials and
Corporates. Currency Call – favour the C$, as well as the A$, which is expected to
outperform. Alternative Strategies – underweight high yield, overweight Emerging Markets
Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
Privacy Policy and Legal Disclaimer
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
September & October = difficult months for the market
I dont want to be the bearer of bad news, but summer vacation season is quickly coming to an end. Traditionally, September and october are very difficult months for the market. Significant volatility is common during these months, even during normal years. With the dramatic movement of the market over the past few months, I believe that it could be a challenging period. On the positive side, it is a great time to revamp your portfolio, and protect it from further market volatility. If you have been considering a change with your portfolio, or you are looking for a second opinion, why not give me a call? Do you want to discuss your alternatives? Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Thursday, August 20, 2009
you need to be prepared for strong fiscal policy response if deflation continues
Yesterday morning, Statistics Canada reported that we still see signs of deflation. If deflation remains an issue, it will definitely affect investors, as it has a negative impact on consumer behaviour, and therefore on most stock prices. On the positive side, it makes it likely that the Bank of Canada will remain committed to low interest rates, in the interest of spurring growth. Regardless, deflation is much more problematic for global central banks than mild inflation, so you need to be prepared for strong fiscal policy response if deflation continues. If you are unsure if your portfolio is prepared for a deflationary environment, perhaps it is time for a second opinion
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Monday, August 17, 2009
not surprising to see some profit taking
Global markets have been down dramatically overnight. North American markets look set to follow suit. After several months of significant improvement, it is not surprising to see some profit taking. It will be important to see if buyers wade back in to the market if prices pull back, and the next few days may tell us the direction the market will be headed over the next few months. Stay tuned to www,am980.ca to follow the market news, and feel free to call me if you need a second opinion.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Friday, August 14, 2009
Wareham Weekly Insights
The big picture
On the road to recovery
The U.S. Federal Reserve delivered a vote of confidence on Wednesday, declaring that U.S. economic activity is “levelling out.” The central bank held its key lending rate at a record low, and signalled it would end one of its stimulus programs (buying U.S. Treasury securities) at the end of October. In Europe, Germany and France unexpectedly returned to growth in the second quarter. Good news also came out of the U.K. – data showed house prices stabilized, and the Royal Institution of Chartered Surveyors now predicts the average house price will rise by the end of the year, reversing its forecast of a 10% to 15% decline.
Global policy makers must secure a rock-solid economic recovery before they turn their attention to exit strategies from stimulus policies, says Canadian Finance Minister Jim Flaherty. “What positive signs we have seen are encouraging, but they are tentative,” he said, referring to car sales, consumer confidence and housing as sources of optimism, versus continued worries about global financial institutions and weakness in the United States, Canada’s biggest trading partner.
Markets
A bumpy ride and the car of the future
Markets were volatile early in the week, and then strengthened on the Federal Reserve’s optimism and a boost in the forecasted demand for global crude oil. The Canadian dollar halted a four-day slide on Wednesday, as stocks and oil prices rose. The U.S. government’s $3-billion “cash for clunkers” program drove 270,000 vehicle sales in two weeks, prompting Ford to hike factory output. General Motors claims its new electric car, the Chevy Volt, will get an unprecedented 230 miles per gallon (100 km/l), four times the mileage of Toyota’s Prius. It will go on sale in late 2010 for US$40,000. Meanwhile Volkswagen announced that it will pay US$4.7 billion for a 42% stake in Porsche as it executes a gradual merger.
Ottawa will not block the sale of Nortel’s wireless assets to Ericsson, but left open the prospect of a review under the Investment Canada Act. Critics argue the sale would put cutting-edge technology in the hands of foreigners. Toronto-based Brookfield Asset Management launched a US$4-billion real estate turnaround fund, which will buy distressed houses and office towers around the globe. In contrast, Canada’s largest pension fund manager, the Caisse de dépôt, announced a $5.7-billion writedown on its property holdings this week. Despite the recession, McDonald’s sales rose 4.3% in July thanks to its new McCafé line and Walmart beat expectations with profits of US$3.44 billion for the quarter, roughly equal to a year ago.
Our recommendation
Rebalance portfolios to buy low, sell high
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Profit taking would also not be unexpected; recall that September, on average, is the worst month for equity investors historically.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Provincials and Municipals, neutral on Corporates. Currency Call – favour the C$, exception being A$ which is expected to outperform; Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
On the road to recovery
The U.S. Federal Reserve delivered a vote of confidence on Wednesday, declaring that U.S. economic activity is “levelling out.” The central bank held its key lending rate at a record low, and signalled it would end one of its stimulus programs (buying U.S. Treasury securities) at the end of October. In Europe, Germany and France unexpectedly returned to growth in the second quarter. Good news also came out of the U.K. – data showed house prices stabilized, and the Royal Institution of Chartered Surveyors now predicts the average house price will rise by the end of the year, reversing its forecast of a 10% to 15% decline.
Global policy makers must secure a rock-solid economic recovery before they turn their attention to exit strategies from stimulus policies, says Canadian Finance Minister Jim Flaherty. “What positive signs we have seen are encouraging, but they are tentative,” he said, referring to car sales, consumer confidence and housing as sources of optimism, versus continued worries about global financial institutions and weakness in the United States, Canada’s biggest trading partner.
Markets
A bumpy ride and the car of the future
Markets were volatile early in the week, and then strengthened on the Federal Reserve’s optimism and a boost in the forecasted demand for global crude oil. The Canadian dollar halted a four-day slide on Wednesday, as stocks and oil prices rose. The U.S. government’s $3-billion “cash for clunkers” program drove 270,000 vehicle sales in two weeks, prompting Ford to hike factory output. General Motors claims its new electric car, the Chevy Volt, will get an unprecedented 230 miles per gallon (100 km/l), four times the mileage of Toyota’s Prius. It will go on sale in late 2010 for US$40,000. Meanwhile Volkswagen announced that it will pay US$4.7 billion for a 42% stake in Porsche as it executes a gradual merger.
Ottawa will not block the sale of Nortel’s wireless assets to Ericsson, but left open the prospect of a review under the Investment Canada Act. Critics argue the sale would put cutting-edge technology in the hands of foreigners. Toronto-based Brookfield Asset Management launched a US$4-billion real estate turnaround fund, which will buy distressed houses and office towers around the globe. In contrast, Canada’s largest pension fund manager, the Caisse de dépôt, announced a $5.7-billion writedown on its property holdings this week. Despite the recession, McDonald’s sales rose 4.3% in July thanks to its new McCafé line and Walmart beat expectations with profits of US$3.44 billion for the quarter, roughly equal to a year ago.
Our recommendation
Rebalance portfolios to buy low, sell high
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the market trend remains upward in the short term despite economic risks on the horizon. Although market valuations are not excessive at current levels, they are already pricing in a significant rebound in earnings in 2010. A period of consolidation or a range bound market allowing time for fundamentals to catch up with share prices is likely to occur over the coming months. Profit taking would also not be unexpected; recall that September, on average, is the worst month for equity investors historically.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Provincials and Municipals, neutral on Corporates. Currency Call – favour the C$, exception being A$ which is expected to outperform; Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
tune in tomorrow, as I discuss using covered calls as another way to generate income
Over the last few months, I have frequently discussed the value of earning income from your portfolio. Interest and dividend income are both important, especially in difficult market conditions. I continue to emphasize the importance of investing for income, and I invite you to tune in tomorrow, as I discuss using covered calls as another way to generate income, and create a sell discipline for your portfolio. This strategy is a bit more complicated, but may add several percent to your portfolio's return, so it really is worth considering. Tune in tomorrow at 9:30 AM, for Beyond Funds Market Weekly, and learn about this innovative idea.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Wednesday, August 12, 2009
The Options Market
One of the most misunderstood areas of the investment world is the options market. Many investors think of options as a risky, speculative investment. In general, options are bought by people who expect dramatic, short term moves in stocks, and this is definitely the realm of speculators. However, one of the most successful strategies for earning extra income for a long term investor is covered call writing. This iinvolves selling an option on a stock you own. It sounds complicated, but tune in Saturday morning, and I will explain how this may help increase your returns.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Monday, August 10, 2009
Economic recovery: pressure for central banks raise rates
Global interest rates remain at record lows, and this has an impact on many areas of your financial plan. Bond prices, mortgage rates, and even the price of preferred shares and common stocks are directly impacted by the policies of our global central banks. As the economy recovers, pressure will eventually build for central banks to start raising rates, and this will dramatically impact your investments. Although the equity market has experienced a dramatic recovery, it makes sense to look at your plan, and ensure that you are prepared for changing fiscal policy. If you are looking for a second opinion, why not give me a call, nad we can ensure you are prepared for a recovering economy.
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Do you want to discuss your alternatives?
Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Wareham Weekly Insights
The big picture
Australia and Europe next in line for recovery
The European Central Bank left interest rates at record lows as the European economy showed signs of recovery and may even return to growth this quarter. But in Britain, while interest rates were unchanged, the Bank of England expanded its quantitative easing program by £50 billion ($US 84 billion), saying the U.K.’s recession is deeper than policy makers expected.
In the U.S., the pace of job losses slowed and the unemployment rate dropped for the first time since April 2008, the clearest sign yet that the recession is easing. Payrolls fell by 247,000 in July, after a 443,000 loss in June, and the jobless rate dropped to 9.4% from 9.5%. Small business employment, a closely watched indicator, declined for the 18th straight month. Small businesses are typically the first to hire again after a recession. U.S. retailers saw their 11th straight month of sales declines, with sales down 5.1% from a year ago. In contrast, Australia defied expectations with a rise in employment of 32,200, keeping the jobless rate steady at 5.8%, in a show of strength that could make it the first developed country to tighten its fiscal policy.
The markets
Stocks rally, then fall back
After a three-day weekend, Canadian stocks took off on Tuesday, breaking through the 11,000 barrier to a 10-month high. U.S. stocks started strong on Monday with the S&P 500 rising above 1,000 for the first time in nine months. As the Canadian dollar hit a 10-month high versus the U.S. currency on Tuesday, Finance Minister Jim Flaherty warned of taking measures if a strong currency threatens economic recovery. U.S. oil prices fell back slightly from a six-week high on Thursday, settling at $72.
Agrium posted a better-than-expected quarterly profit and predicts improving demand in the fall as farmers have delayed purchases because of the credit crunch and high fertilizer prices. Organic food retailer Whole Foods Market, criticized for its high prices, surprised analysts with a slight profit increase versus the expected 13% decline in earnings, causing the stock to soar 15%. Despite McDonald’s aggressive coffee promotion, Tim Hortons increased sales amidst a weak economy with profits rising 3.7% in the second quarter.
Our recommendation
Favour shorter-maturity bonds as rates set to rise
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the group believes that equity markets will endure a pullback or period of consolidation over the coming weeks, while seeking greater fundamental evidence and support for a sustained bull market. Although stocks advanced dramatically since the March lows, Q2 earnings results in the U.S. came in better than forecast, providing support for recent strength before equities resume a sideways trend.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Provincials and Municipals, neutral on Corporates. Currency Call – generally favour the C$ against most majors, exception being A$ which is expected to outperform;
Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
·Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Australia and Europe next in line for recovery
The European Central Bank left interest rates at record lows as the European economy showed signs of recovery and may even return to growth this quarter. But in Britain, while interest rates were unchanged, the Bank of England expanded its quantitative easing program by £50 billion ($US 84 billion), saying the U.K.’s recession is deeper than policy makers expected.
In the U.S., the pace of job losses slowed and the unemployment rate dropped for the first time since April 2008, the clearest sign yet that the recession is easing. Payrolls fell by 247,000 in July, after a 443,000 loss in June, and the jobless rate dropped to 9.4% from 9.5%. Small business employment, a closely watched indicator, declined for the 18th straight month. Small businesses are typically the first to hire again after a recession. U.S. retailers saw their 11th straight month of sales declines, with sales down 5.1% from a year ago. In contrast, Australia defied expectations with a rise in employment of 32,200, keeping the jobless rate steady at 5.8%, in a show of strength that could make it the first developed country to tighten its fiscal policy.
The markets
Stocks rally, then fall back
After a three-day weekend, Canadian stocks took off on Tuesday, breaking through the 11,000 barrier to a 10-month high. U.S. stocks started strong on Monday with the S&P 500 rising above 1,000 for the first time in nine months. As the Canadian dollar hit a 10-month high versus the U.S. currency on Tuesday, Finance Minister Jim Flaherty warned of taking measures if a strong currency threatens economic recovery. U.S. oil prices fell back slightly from a six-week high on Thursday, settling at $72.
Agrium posted a better-than-expected quarterly profit and predicts improving demand in the fall as farmers have delayed purchases because of the credit crunch and high fertilizer prices. Organic food retailer Whole Foods Market, criticized for its high prices, surprised analysts with a slight profit increase versus the expected 13% decline in earnings, causing the stock to soar 15%. Despite McDonald’s aggressive coffee promotion, Tim Hortons increased sales amidst a weak economy with profits rising 3.7% in the second quarter.
Our recommendation
Favour shorter-maturity bonds as rates set to rise
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the group believes that equity markets will endure a pullback or period of consolidation over the coming weeks, while seeking greater fundamental evidence and support for a sustained bull market. Although stocks advanced dramatically since the March lows, Q2 earnings results in the U.S. came in better than forecast, providing support for recent strength before equities resume a sideways trend.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Provincials and Municipals, neutral on Corporates. Currency Call – generally favour the C$ against most majors, exception being A$ which is expected to outperform;
Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
·Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Wednesday, August 5, 2009
Invest in companies that fit with your long term goals
Several remarkable benchmarks have been reached this week, as the TSX has burst through 11000, a day after the Nasdaq broke 2000 and the S&P through 1000. This represents a 40 to 50 percent rally for these markets from their bottom in March, and you may be tempted to chase the rally, and buy stocks. It may make sense to invest in companies that fit with your long term goals, but the rally has made many equities relatively expensive. If you are looking to add to your equity holdings, why not look for a second opinion Do you want to discuss your alternatives? Have you outgrown your mutual funds?
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
For a review your portfolio, or a complimentary copy of my CD, visit, www.beyondfunds.ca or call me, Jeff Wareham, at 519 660 3260. This program is for information purposes only. Fees, management fees and commissions may be associated with mutual fund investing. Investors should consult their prospectus before investing. Views expressed are those of the author, not Scotia Capital. ScotiaMcLeod is a division of Scotia Capital, member CIPF
Tuesday, August 4, 2009
Wareham Weekly Insights
The big picture
Nurturing a recovery
While the Bank of Canada updated their forecast last week to include expectations for the recession to end in Canada in the third quarter of 2009, Finance Minister Jim Flaherty’s view was more cautious, saying that stimulus spending would continue until a recovery takes firm hold. Flaherty cautioned that unemployment would persist as firms are typically slow to hire after a recession. Unemployment climbed sharply in May, up 9.2% from April, to 778,700. The federal government is being pressed to block the US$1.13-billion sale of Nortel’s wireless division, including 125 patents, to Swedish firm Ericsson. Ontario Finance Minister Dwight Duncan joined federal opposition leaders, saying, “We just think every step should be taken to try to keep these patents in Canadian hands so that the industry can continue to develop here in Canada.”
In the U.S., new home sales rose by 11% in June, the biggest rise in more than eight years – more evidence that the housing market is finally bouncing back. As well, home prices rose on a month-to-month basis for the first time since July 2006, up 0.5% in May versus a decline of 0.6% in April. In other positive news, the rate that banks charge each other to borrow for three months fell below 0.5% for the first time, another signal that confidence is returning to credit markets.
Markets
U.S. and Europe make gains
U.S. stocks surged this week on improved U.S. jobless data and solid corporate profit reports. The S&P 500 reached its highest level in nine months, just points from the psychologically important 1,000 level. The TSX and the Canadian dollar swayed with oil prices, which fell in the first half of the week, then recovered on Thursday. Rising economic sentiment drove European equities to their highest close in nearly nine months.
In market news, Microsoft and Yahoo! will combine forces to take on the number one search engine, Google. The deal is a
10-year revenue sharing scheme, which utilizes Microsoft’s new Bing search engine. Rogers Communications earnings beat analysts’ expectations, but shares fell 5% as the firm lowered its revenue targets to 4%, from 9%, for 2009. Private-equity giant KKR will underwrite its first IPO, alongside Goldman Sachs and Citigroup, issuing shares of U.S. budget retailer Dollar General. U.S. computer giant IBM will buy business analytics software firm SPSS for US$1.2-billion.
Our recommendation
Favour shorter-maturity bonds as rates set to rise
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the group believes that equity markets will endure a pullback or period of consolidation over the coming weeks, while seeking greater fundamental evidence and support for a sustained bull market. Although stocks advanced dramatically since the March lows, Q2 earnings results in the U.S. are coming in ahead of expectations, which may prompt a brief rally before equities resume a sideways trend.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Provincial and Municipals, neutral on Corporates. Currency Call – favour the C$, so no tactical FX calls at this time. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
Nurturing a recovery
While the Bank of Canada updated their forecast last week to include expectations for the recession to end in Canada in the third quarter of 2009, Finance Minister Jim Flaherty’s view was more cautious, saying that stimulus spending would continue until a recovery takes firm hold. Flaherty cautioned that unemployment would persist as firms are typically slow to hire after a recession. Unemployment climbed sharply in May, up 9.2% from April, to 778,700. The federal government is being pressed to block the US$1.13-billion sale of Nortel’s wireless division, including 125 patents, to Swedish firm Ericsson. Ontario Finance Minister Dwight Duncan joined federal opposition leaders, saying, “We just think every step should be taken to try to keep these patents in Canadian hands so that the industry can continue to develop here in Canada.”
In the U.S., new home sales rose by 11% in June, the biggest rise in more than eight years – more evidence that the housing market is finally bouncing back. As well, home prices rose on a month-to-month basis for the first time since July 2006, up 0.5% in May versus a decline of 0.6% in April. In other positive news, the rate that banks charge each other to borrow for three months fell below 0.5% for the first time, another signal that confidence is returning to credit markets.
Markets
U.S. and Europe make gains
U.S. stocks surged this week on improved U.S. jobless data and solid corporate profit reports. The S&P 500 reached its highest level in nine months, just points from the psychologically important 1,000 level. The TSX and the Canadian dollar swayed with oil prices, which fell in the first half of the week, then recovered on Thursday. Rising economic sentiment drove European equities to their highest close in nearly nine months.
In market news, Microsoft and Yahoo! will combine forces to take on the number one search engine, Google. The deal is a
10-year revenue sharing scheme, which utilizes Microsoft’s new Bing search engine. Rogers Communications earnings beat analysts’ expectations, but shares fell 5% as the firm lowered its revenue targets to 4%, from 9%, for 2009. Private-equity giant KKR will underwrite its first IPO, alongside Goldman Sachs and Citigroup, issuing shares of U.S. budget retailer Dollar General. U.S. computer giant IBM will buy business analytics software firm SPSS for US$1.2-billion.
Our recommendation
Favour shorter-maturity bonds as rates set to rise
· Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says the group believes that equity markets will endure a pullback or period of consolidation over the coming weeks, while seeking greater fundamental evidence and support for a sustained bull market. Although stocks advanced dramatically since the March lows, Q2 earnings results in the U.S. are coming in ahead of expectations, which may prompt a brief rally before equities resume a sideways trend.
Fixed income. Chris Kennedy, Associate Director, Portfolio Advisory Group, highlights the desk’s current recommendations as follows: Term Call – below benchmark duration. Sector Call – underweight Canadas, overweight Provincial and Municipals, neutral on Corporates. Currency Call – favour the C$, so no tactical FX calls at this time. Alternative Strategies – underweight high yield, overweight Emerging Markets Debt, neutral on inflation protected bonds.
Portfolio strategy. When market volatility leads to large shifts in the weights of individual holdings, we recommend clients rebalance portfolios to maintain a discipline that encourages profit taking on strength, while adding on weakness in other positions that may have underperformed.
TM Trademarks used under authorization and control of The Bank of Nova Scotia.
ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF
This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. ("SCI"), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. All performance data represents past performance and is not indicative of future performance. Scotia Capital Inc. and its affiliates collectively beneficially own in excess of 1% of one or more classes of the issued and outstanding equity securities of Royal Bank. Within the last 12 months, Scotia Capital Inc. and/or its affiliates have undertaken an underwriting liability with respect to equity or debt securities of, or have provided advice for a fee with respect to Royal Bank. TM Trademark used under authorization and control of The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.
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