Good Morning…This is Jeff Wareham, ScotiaMcLeod Wealth Advisor, and this is Beyond Funds market weekly for May 31st, 2008.
May 2008 is in the books, and it will go into the record books as a recovery month for 3 of the 4 major North American markets. The Nasdaq, Standard & Poors, and TSX all posted significant gains for the month, and the TSX posted a new record high later in the months, breaking through the psychologically significant level of 15000.
The Dow missed the party, dragged lower by continued losses in major US financials, and a significant, 20 percent drop in shares of General Motors, an index component.
An investor who followed the old adage of “Sell in May and go away” has certainly missed the positive impact of equity market returns this month.
Let’s take a look at global returns and year to date market performance, adjusted to our Canadian currency.
Across the Americas, the NASDAQ lags the field with a year to date return of -4.65%, while the Dow has returned -4.49% and the S&P 500 return is -4.39.
Toronto has fared much better, up 6.37 percent on a year to date basis, even though it has shed 2% from the peak reached earlier this month.
The true superstars of this year’s global market, on a currency adjusted basis, are Mexico’s Bolsa, up 14.89% and Brazil’s Bovespa, which has charged ahead a remarkable 24.53%
Europe, in spite of a strengthened currency, has joined the US on the negative side of the ledger. Every European market is down for the year, although Amsterdam (0.64), and Stockholm (0.41) are ahead slightly on a currency adjusted basis. The European majors have really struggled. The Stoxx 50 is off 8.2%, the FTSE off 6.09%, the CAC 40 off 4.51%,, the DAX is off 5.95%, and the IBEX is off 4.22%. These market returns are even worse without the impact of a six percent gain in the Euro…unadjusted, most are down over 10%.
Asia is flat to down, with the Nikkei off 0.47%, the ASX in Australia off 2.51%, and the Hang Seng is off 11.63%.
Scotia Economics has revised its global outlook this week, and here is some of the relevant commentary…it was entitled Up, Down and Sideways.
p — Our revised energy price outlook now calls for WTI crude oil to average US$125/bbl in 2008, and
$135-140/bbl in 2009. Natural gas prices are expected to average US$11/mmbtu both this year and next.
Changing fundamentals are behind the upward shift in the price of energy, particularly oil. While the
demand for products emanating from developing economies continues to move higher, the global supply of
energy products continues to move lower, reflecting aging production structures.
Accordingly, we have raised our aggregate inflation estimates for most countries through the remainder of
2008 and into 2009. This not only reflects the roughly 30% jump in the price of crude oil just to around
US$130/bbl since the beginning of Q2 alone, but the increasing likelihood that the elevated price of this key
staple will now trigger broader inflationary gains because of its pervasiveness throughout the production
chain for goods and services.
Down — We have lowered our output growth forecasts for 2009 in the United States, Canada, and
internationally as well. The downward revisions largely reflect the lagged fallout from the escalating rise in
the price of energy. Over the forecast period, the dramatically higher prices for crude oil, gasoline, and
other strategic petroleum-based inputs, will ultimately raise production costs, compress profit margins,
reduce investments, and put an added squeeze on discretionary consumer purchases. In the United States,
these trends should become more visible later this year once the temporary effects of the tax rebates work
their way through the economy.
Growth in Canada should essentially perform in line with the modest gains expected in the United States in
2008, led by the continuing buoyancy in the resource-rich sectors that cover virtually every province.
Prospects for Ontario’s large export-centric manufacturing sector have been further cut in response to the
weaker U.S. outlook, and the additional retrenchment in the key auto and housing sectors. A number of
factors, some transitory, helped to drag Q1output into negative growth territory, exaggerating the slowdown
underway. Domestic conditions — including profitability — fundamentally remain in better shape than south
of the border. Moreover, the performance gap between the two countries widens in Canada’s favour in
2009 — an important factor underpinning our stronger Canadian dollar forecast — owing to more
favourable construction, employment, household balance sheet, and fiscal trends.
Although recent results in Japan, the U.K. and the Euro Zone have added to this year’s growth, we have
lowered the outlook for 2009 modestly to reflect the further reduction in U.S. prospects, the continuing
monetary caution in the U.K. and on the continent to rein in higher inflation, and the downturn in selected
housing and consumer spending markets.
Sideways — Renewed inflation concerns have pushed bond yields higher and steepened yield curves
throughout the developed world. Recent guidance by central bankers in the developed countries suggests
that monetary policy, for the most part, will remain on hold through the remainder of 2008. However, we
believe that another bout of U.S. economic weakness later this year will dampen price pressures and
trigger renewed Fed easing that would see the overnight funds rate drop to 1.25% by the end of 09Q1 — a
combined 75 bp reduction from the 2% rate today.
The weaker-than-expected starting point for the Canadian economy in Q1 reinforces our view that the Bank
of Canada will trim the overnight cost of borrowing another 25 bps at its upcoming June 10th rate-setting
meeting. Thereafter, we feel that the Bank of Canada will mirror policy developments in the United States,
preferring to keep its overnight rate at 2.75% through the balance of the year before lowering it again by
50 bps in Q1 to 2.25% as the spillover from the intensifying economic weakness in the United States
becomes more evident domestically.
On a side note, an odd piece of data came to light…US growth has remained positive through the first quarter of the year, while Canadian GDP slipped to the negative. The technical definition of a recession is two periods of negative growth…it would be strange if the US avoided a recession, and Canada had one, with the remarkable psychological strength of our economy, relative to the US.
On a regional note, I was in Newfoundland last weekend, and I must say Ontario took some good spirited ribbing at the fact that Newfoundland was, for the first time, sending transfer payments to Ontario.
After the break, I will share more of my experience in Newfoundland, as I talk further about the opportunity to benefit charity, and your family, by considering a gift of securities in your estate plan.
Stay tuned for segment two of beyond funds market weekly.
Saturday, May 31, 2008
Friday, May 30, 2008
Protect Your Portfolio
This is Jeff Wareham, ScotiaMcLeod wealth advisor, with some thoughts for investors outgrowing their mutual funds…
On Wednesday, I stated that proper diversification and risk management is almost impossible by investing in only the Canadian market.
Tune in tomorrow at 8:30, as I review the May performance of the markets around the world, and discuss ideas to protect your portfolio from swings in the value of commodity prices. Learn more about diversifying, in a market that is dominated by the global commodity story.
In segments two and three, I will discuss the impact of making a gift to charity a part of your estate plan, and cover several novel ways to maximize your gift.
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 Inc, member CIPF.
On Wednesday, I stated that proper diversification and risk management is almost impossible by investing in only the Canadian market.
Tune in tomorrow at 8:30, as I review the May performance of the markets around the world, and discuss ideas to protect your portfolio from swings in the value of commodity prices. Learn more about diversifying, in a market that is dominated by the global commodity story.
In segments two and three, I will discuss the impact of making a gift to charity a part of your estate plan, and cover several novel ways to maximize your gift.
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 Inc, member CIPF.
Wednesday, May 28, 2008
Risk of the Canadian market
This is Jeff Wareham, ScotiaMcLeod wealth advisor, with some thoughts for investors outgrowing their mutual funds…
If you have been listening to my commentary the last two weeks, you will now that I have been banging on the drum of the risk the Canadian market presents to those holding ETFs, Canadian Index funds, and Canadian mutual funds. Yesterday, and essentially over the last week, the TSX has been hammered by a relatively minor drop in global energy and commodity prices. The reality is, a slowdown in the global economy could significantly harm investors who have been happy to participate in the upward market movement over the last couple of months.
Proper diversification and risk management is almost impossible by investing in only the Canadian market.
Learn more about diversifying, in a market that is dominated by the global commodity story.
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 Inc, member CIPF.
If you have been listening to my commentary the last two weeks, you will now that I have been banging on the drum of the risk the Canadian market presents to those holding ETFs, Canadian Index funds, and Canadian mutual funds. Yesterday, and essentially over the last week, the TSX has been hammered by a relatively minor drop in global energy and commodity prices. The reality is, a slowdown in the global economy could significantly harm investors who have been happy to participate in the upward market movement over the last couple of months.
Proper diversification and risk management is almost impossible by investing in only the Canadian market.
Learn more about diversifying, in a market that is dominated by the global commodity story.
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 Inc, member CIPF.
Monday, May 26, 2008
Terry Fox
This is Jeff Wareham, ScotiaMcLeod Wealth Advisor with some thoughts for
investors outgrowing their mutual funds.
I am actually in Newfoundland today, and was lucky enough to witness the
launch of the Terry Fox tour of hope...a memorial tour featuring the van
Terry used in his marathon of hope. Seeing the progress that has been made
as a result of terry's heroism was both inspirational, and a reminder that
one of the most important financial planning issues is ensuring that your
charitable wishes are carried out in as efficient and tax effective a manner
as possible. Proper planning can reduce or eliminate the tax payable on
securities gifted to charity.
Do you need to review your estate plan?
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
Inc, member CIPF.
investors outgrowing their mutual funds.
I am actually in Newfoundland today, and was lucky enough to witness the
launch of the Terry Fox tour of hope...a memorial tour featuring the van
Terry used in his marathon of hope. Seeing the progress that has been made
as a result of terry's heroism was both inspirational, and a reminder that
one of the most important financial planning issues is ensuring that your
charitable wishes are carried out in as efficient and tax effective a manner
as possible. Proper planning can reduce or eliminate the tax payable on
securities gifted to charity.
Do you need to review your estate plan?
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
Inc, member CIPF.
Saturday, May 24, 2008
May 24, 2008
I am ScotiaMcLeod Wealth Advisor Jeff Wareham, with your Beyond Funds market Weekly Market summary
The performance gap between Canadian and global markets remained wide this week, as investors continued to seek comfort in the performance of Energy and Material stocks.
US stocks remained in correction territory, albeit well off their 2008 lows, while the Canadian market set a new all time high, and broke through the 15000 level, before selling off mid week.
There was no stopping oil, as the latest market darling broke through both 130 and 135 dollars per barrel during the week.
The canadian dollar followed suit, gaining a couple of cents against the greenback, ending at 101.04 US.
Toronto’s TSX closed the week at 14723, while the Dow limped into the memorial day weekend at 12479, and the Nasdaq stumbled to 2444. the S&P closed out the week at 1375, down 3.5% on the week.
Oil touched 135 earlier yesterday, but ended the week at 131.79.
Gold, and the Canadian dollar, gained on the US greenback, largely because it appears that we have reached the bottom of the current interest rate easing cycle in the US, with apparently pretty mixed results.
The strength of the Canadian dollar was global this week, as it gained significantly on the Euro as well…largely on energy and material strength.
Speaking of energy, Scotia Economics released its Commodities Outlook this week…it is pretty detailed, so I will touch on the highlights, and post the details on my blog on the AM 980 web site.
On the oil side, our analysts have increased their price forecasts in both 2008 and 2009…not great news for those of us that drive, or heat our homes, but very good for those who are invested in the energy sector, as most experts still agree that most energy companies are not yet priced for the impact of elevated energy prices.
Scotia Economics upped their forecast price for 2008 to 140 US…and they note that both oil and natural gas are likely to continue their price climb due to growing demand, subsidies in many Asian economies, and unexpectedly low growth of supplies outside of the OPEC countries.
Conversely, many other commodity price forecasts from our economic outlook are significantly lower than their current price…this includes pulp and paper products, zinc, nickel, and copper…although uranium, a substitute in the energy market, are seen going higher..
The slowing global economy should curb some commodity demand. This is great if you are worried about inflation, but not so if you are heavily exposed to materials or commodities in your portfolio…this may not seem important, but many Canadian equity funds have massive commodity exposure…and this includes the very popular category of index funds, as more than half of the Canadian index is now represented by energy and materials stock. As of a few days ago, Scotia’s portfolio advisory group noted that, if you add in financials, 75% of the index is covered by three key sectors…meaning many other sectors, like conglomerates, consumer products, healthcare, utilities, manufacturing, and even transport and technology are badly under represented by our index…meaning investors need to look elsewhere to cover these vital parts of the economy.
Fact is, if the economy does slow globally, and it appears it is, materials, energy, and financials may take their lumps…meaning investors focused in Canada may have real problems with return.
It is always good to diversify…right now, I believe it is critical.
The performance gap between Canadian and global markets remained wide this week, as investors continued to seek comfort in the performance of Energy and Material stocks.
US stocks remained in correction territory, albeit well off their 2008 lows, while the Canadian market set a new all time high, and broke through the 15000 level, before selling off mid week.
There was no stopping oil, as the latest market darling broke through both 130 and 135 dollars per barrel during the week.
The canadian dollar followed suit, gaining a couple of cents against the greenback, ending at 101.04 US.
Toronto’s TSX closed the week at 14723, while the Dow limped into the memorial day weekend at 12479, and the Nasdaq stumbled to 2444. the S&P closed out the week at 1375, down 3.5% on the week.
Oil touched 135 earlier yesterday, but ended the week at 131.79.
Gold, and the Canadian dollar, gained on the US greenback, largely because it appears that we have reached the bottom of the current interest rate easing cycle in the US, with apparently pretty mixed results.
The strength of the Canadian dollar was global this week, as it gained significantly on the Euro as well…largely on energy and material strength.
Speaking of energy, Scotia Economics released its Commodities Outlook this week…it is pretty detailed, so I will touch on the highlights, and post the details on my blog on the AM 980 web site.
On the oil side, our analysts have increased their price forecasts in both 2008 and 2009…not great news for those of us that drive, or heat our homes, but very good for those who are invested in the energy sector, as most experts still agree that most energy companies are not yet priced for the impact of elevated energy prices.
Scotia Economics upped their forecast price for 2008 to 140 US…and they note that both oil and natural gas are likely to continue their price climb due to growing demand, subsidies in many Asian economies, and unexpectedly low growth of supplies outside of the OPEC countries.
Conversely, many other commodity price forecasts from our economic outlook are significantly lower than their current price…this includes pulp and paper products, zinc, nickel, and copper…although uranium, a substitute in the energy market, are seen going higher..
The slowing global economy should curb some commodity demand. This is great if you are worried about inflation, but not so if you are heavily exposed to materials or commodities in your portfolio…this may not seem important, but many Canadian equity funds have massive commodity exposure…and this includes the very popular category of index funds, as more than half of the Canadian index is now represented by energy and materials stock. As of a few days ago, Scotia’s portfolio advisory group noted that, if you add in financials, 75% of the index is covered by three key sectors…meaning many other sectors, like conglomerates, consumer products, healthcare, utilities, manufacturing, and even transport and technology are badly under represented by our index…meaning investors need to look elsewhere to cover these vital parts of the economy.
Fact is, if the economy does slow globally, and it appears it is, materials, energy, and financials may take their lumps…meaning investors focused in Canada may have real problems with return.
It is always good to diversify…right now, I believe it is critical.
Friday, May 23, 2008
The Value of Diversification
This is Jeff Wareham, ScotiaMcLeod wealth advisor, with some thoughts for investors outgrowing their mutual funds…
This week, we have seen lots of volatility, in energy, material, telecommunication, and even financial stocks. The market has seen new records, as has oil. As I have mentioned a number of times, there is great value in diversifying, so that up days in one sector protect you from losses in another. Tune in tomorrow morning, as I discuss the very topical issue of commodities in the global market…hear what Scotia Economics has to say about the ongoing boom in this area, which is so important to the Canadian economy.
Learn more about diversifying, in a market that is dominated by the global commodity story.
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 Inc, member CIPF.
This week, we have seen lots of volatility, in energy, material, telecommunication, and even financial stocks. The market has seen new records, as has oil. As I have mentioned a number of times, there is great value in diversifying, so that up days in one sector protect you from losses in another. Tune in tomorrow morning, as I discuss the very topical issue of commodities in the global market…hear what Scotia Economics has to say about the ongoing boom in this area, which is so important to the Canadian economy.
Learn more about diversifying, in a market that is dominated by the global commodity story.
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 Inc, member CIPF.
Wednesday, May 21, 2008
Diversity in Portfolios
This is Jeff Wareham, ScotiaMcLeod wealth advisor, with some thoughts for investors outgrowing their mutual funds…
Yesterday was a perfect example of why I have been discussing the need for investors to diversify their portfolios…Canada and the US moved in opposite directions, driven by inflation of material and energy prices. With the move in the Canadian markets over the last few years, about half of our market’s value comes from material and energy stocks…investing in our index amounts to a pretty risky bet on the long term price of commodities, especially for more conservative investors. Although commodities may benefit in a rapidly growing global economy, an economic slowdown will dramatically impact their value. Many equity funds will want to keep up with the index’ return, so they are likely to focus in the material and energy sector, and as a result, portfolios focused on Canadian equity may become riskier as fund managers mirror the index.
Now is the time to ensure you are properly diversified.
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 Inc, member CIPF.
Yesterday was a perfect example of why I have been discussing the need for investors to diversify their portfolios…Canada and the US moved in opposite directions, driven by inflation of material and energy prices. With the move in the Canadian markets over the last few years, about half of our market’s value comes from material and energy stocks…investing in our index amounts to a pretty risky bet on the long term price of commodities, especially for more conservative investors. Although commodities may benefit in a rapidly growing global economy, an economic slowdown will dramatically impact their value. Many equity funds will want to keep up with the index’ return, so they are likely to focus in the material and energy sector, and as a result, portfolios focused on Canadian equity may become riskier as fund managers mirror the index.
Now is the time to ensure you are properly diversified.
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 Inc, member CIPF.
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