More evidence of slowing economic growth outside the United States drove the market narrative this week. On Thursday, the China Flash HSBC /Markit manufacturing purchasing managers’ index showed factory output contracted for the first time in six months. Meantime in Europe, the private sector of its biggest economy – Germany – grew at the slowest rate in 16 months while France witnessed the fastest drop in new business in over a year. The disappointing growth data out of Europe and China came on the heels of Japan’s admission Monday that it officially fell into recession. Its real GDP fell 1.6% on an annualized basis in Q3 following a 7.3% decline in Q2. The back-to-back quarterly contractions meet one definition of recession which some view as a setback to the policies of Prime Minister Shinzo Abe. His ambitious economic agenda – Abenomics – is squarely focused on reviving Japan after two decades of stagnation. To that end, Abe said on Tuesday he would call an early election to seek a fresh mandate for his economic policies and postpone an unpopular sales tax rise. It was an April 1 sales tax increase from 5% to 8% that sparked the deep, second-quarter contraction in GDP which is why Abe wants to delay a further rise in the sales tax rate to 10%. Turning to the US, economic data continued to point to a growing US economy as weekly jobless claims came in below 300,000 – a key gauge – for the tenth week in a row. And on Wednesday, Fed minutes hinted at increasing confidence regarding the economy. In Canada, officials voiced disappointment after the Keystone XL pipeline failed to make it through the US Senate and the Canadian government offered – for the third time this year – a 50-year-bond maturing in 2064.
Stocks move ahead
North American stocks advanced through Thursday with the Dow and S&P 500 reaching new record highs. For the four days covered in this report, the Dow rose 85 pts. to close at 17,719, the S&P 500 added 13 pts. to end at 2,052 and the Nasdaq gained 13 pts. to finish at 4,701. The TSX put in the strongest showing to Thursday close and now stands at multi-month highs after adding 232 pts. to end at 15,075.
We continue to favour US equities; Upcoming OPEC meeting may not be the panacea some may be hoping for
Fixed Income: Andrew Mystic, Director, Portfolio Advisory Group wrote: “Broader global issues continue to hold rates down with weaker growth and deflationary concerns in Europe and Japan as well as seemingly slower growth momentum in China. Adding to the bid tone are continued geo-political risks (e.g. Ukraine, Iran). Although the FOMC’s December meeting could potentially act as a short term catalyst to spike rates, broader global macro issues will likely continue to dominate the positive tone coming out of the US. With credit now having stabilized but lagging the improved tone seen in the US, we do see some modest value in some BBB sectors – most notably in REITs and Retail.”
As 2014 begins to wind down, now is a great time to reflect on year-end tax planning opportunities that will need to be implemented prior to December 31st. The article highlights some popular tax planning items that you should be aware of this year: Tax Loss Selling, Tax Instalments, Withdrawing from TFSA, Donating Public Securities with Gains, RRSP Contributions, Income Splitting Loans, Deferral of Income, Purchasing Capital Assets, Family Income Splitting and Child Fitness Tax Credits.
Markets around the globe were much more volatile in the third quarter than they had been in the first half of 2014 as investors weighed stronger U.S. economic numbers, weak economic figures across Europe, slowing Chinese growth figures, and increased geopolitical tensions around the globe. Heading into the final three months of the year, global markets will likely continue to focus on the geopolitical concerns across the globe as they heavily impact consumer sentiment and investor decisions.
Here are some of the highlights of what our Autumn 2014 Investment Portfolio Quarterly (IPQ) offers:
* The Scotiabank GBM Portfolio Strategy Team provides their Autumn 2014 Strategy Update report
* Scotiabank Economist Derek Holt discusses forecasting potential GDP growth in the U.S.
* Himalaya Jain illustrates his view on the energy market and explains the recent drop in oil prices
* Tina Di Vito outlines the issues and importance of succession planning
* In conclusion, Warren Hastings, Caroline Escott, and Anthony Salvatore provide their quarterly review and commentary on the performance of the Guided Portfolios
We hope you all enjoy the Autumn 2014 version of the IPQ and recommend you contact us with regard to any ideas presented here which interest you, or to review your investment portfolio.
Thoughts on Energy Market Volatility Since hitting a high in mid-June, global oil prices have officially entered a bear market, with U.S. benchmark West Texas Intermediate (WTI) prices down 23% and global Brent prices off 25% (in USD). In terms of Canadian dollar equivalent, WTI is down 19% from the June peak and Brent is down 22%. A relatively bullish crude oil environment has transformed very quickly due to the confluence of increased global supply at a time when global economic growth forecase has been reduced. We share our thoughts on recent volatility and cover six main topics influencing the energy market.
For more information on how this may affect your investment portfolio, contact us today to arrange a web conference or phone meeting.