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Market Watch: Global Update

04/24/15

US corporate earnings in focus

Without any big market moving events this week traders kept their eyes on US corporate earnings. What they saw through Wednesday was a mixed bag as results from 120 companies in the S&P 500 show earnings are on track to fall 3.8% from a year earlier. Nevertheless, 76% of those companies have beaten profit expectations that were reduced heading into the reporting season. Revenues, on the other hand, have been harder to come by with just 45% of companies beating top-line projections. Turning to US economic news, existing home sales rose 6.1% in March from February to an annual rate of 5.19 million; the highest level in 18 months. In Europe, there was a minor setback in the trend to higher factory and services activity on the continent as the composite Purchasing Managers Index fell to 53.5 in April from 54 in March. Also in Europe, there was little progress in debt negotiations between Greece and its creditors. A meeting among euro zone finance ministers is scheduled today (April 24) but there is little hope much will come of it in advance of a larger Eurogroup summit May 11, a day before Greece must pay the IMF US$837 million. In Japan, PM Shinzo Abe said Tokyo is near a Pacific free-trade pact agreement with Washington that would tighten ties between the two allies. Abe travels to the US capital April 28 to meet President Obama to bring the pact one-step closer to completion. In Canada, the federal budget was released with few surprises Tuesday as Finance Minister Joe Oliver raised the TFSA limit and adjusted RRIF minimum withdrawal factors.

Markets

Stocks set, near records Major North American stock indexes are, once again, setting and nearing price milestones. In the US, the Nasdaq is the latest to join the record club as it breached its all-time closing high Thursday. The tech-heavy index advanced 125 pts. through Thursday to finish at 5,056 which tops the previous closing high of 5,048 set March 10, 2000. The Dow and S&P 500 have already set many records since 2013 and both benchmarks ended the four-day period higher with the Dow advancing 132 pts. to close at 18,058 and the S&P 500 moving ahead 31 pts. to finish at 2,112. In Canada, the TSX is nearing its all-time high of 15,657 after adding 32 pts. through Thursday to settle at 15,392.

Our Recommendations

Attractive opportunities remain elusive in near-term Equities: Himalaya Jain, Director, Portfolio Advisory Group wrote: “Having raised cash positions recently, we continue to view Canadian and US equities as uncompelling in the near-term. While the ebb and flow of Q1 reporting season presents a distraction from the macro environment, our overall concerns have not dissipated; namely valuation (S&P500 P/E at 17x forward 12-month, TSX at 18x), Fed rate hike timetable, geopolitical developments, commodity price volatility, and technical challenges. As our medium-term outlook remains constructive, we think investors can afford to be patient in deploying cash into equity markets. Although we remain optimistic that global oil prices should continue to trend higher as non-OPEC production moderates, we are closely monitoring our positive stance on energy equities as some energy subsectors may already be discounting an unrealistically strong recovery in oil prices as investors flood back into the sector. Indeed, the TSX Energy sector is up 13% since mid-March and 23% higher than mid-December, and only 8.5% lower than early-October levels. Should this Energy sector rally continue (without a corresponding uplift in energy prices), we would be inclined to reduce exposure.”

Global Markets YTD 2015 April 24 CADGlobal Markets YTD 2015 April 24 USD

Investment Portfolio Quarterly – 2015 Spring Edition

04/22/15

It has been a positive start to the year for global equities as the MSCI World Index advanced +1.82% over the quarter with equity benchmarks across the globe reaching new all-time highs.   Although equity markets have moved higher quarter-over-quarter, it has not been achieved without relatively volatile periods.   Events adding to the volatility included: The euro-zone gearing up to begin their quantitative easing program, the possibility of a Greek exit, global oil supply glut, continued geopolitical tensions and a divergence in central bank policy.  The Federal Reserve and Bank of England are moving towards a tightening monetary policy while most other central banks around the globe, including European Central Bank, Bank of Canada, Reserve Bank of Australia and People’s Bank of China, anticipate further easing in 2015.   The move higher in the U.S. dollar against most major currencies has also played a significant role in Q1 returns, although since the mid-March Fed meeting, in which the Fed reiterated their more dovish tone, the USD surge has begun to reverse course.

Download the report for more of this economic report, plus our portfolio strategy, market outlook, report on preferred shares, update on US Estate tax on recreational properties and updates on our guided portfolios.

2015 Spring Investment Portfolio Quarterly

2015 Canadian Federal Budget

04/22/15

2015 Canadian Federal Budget (Proposed)    Yesterday the federal government tabled its Economic Action Plan 2015: a balanced budget for the first time since fiscal 2008.  The Conservative government promised to balance the budget, and Budget 2015 announces that the deficit has been reduced from $55.6 billion at the height of the global and economic financial crisis to a projected surplus of $1.4 billion for 2015-16.  For all the details, click the link above and download an easy-to-understand copy.

Views from the Patch: Energy Update

04/22/15

First Quarter 2015 Update from Jennifer Stevenson, vice president and portfolio manager at Dynamic Funds.  Views from the Patch 2015 April 9

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