Jordan Wealth Management Group - ScotiaMcLeod Truro

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Airlines see $1.7-billion go up in smoke

More than 100,000 flights were cancelled this week around the globe as volcanic ash from an eruption in Iceland turned much of Europe into a no-fly zone. Airlines say they lost at least $1.7-billion in revenue, but the economic impact of the volcano also was felt by shipping companies, the hospitality industry and tourism destinations. Canada’s economy will grow the fastest among Group of Seven countries in 2010 and 2011, expanding 3.1% and 3.2%, according to the International Monetary Fund in its World Economic Outlook report. “Canada entered the global crisis in good shape, and thus the exit strategy appears less challenging than elsewhere,” the report said.

budget deficit was 13.6% of gross domestic product, versus 12.9% reported by the government. Greek civil servants staged a 24-hour strike against austerity measures and expected job cuts as the Greek government began talks this week with the IMF, the European Central Bank and the European Commission for a three-year rescue package aimed at easing the country’s debt load, which exceeds $400-billion, or 115% of GDP.

Markets

Goldman and Greece deal double blow to markets

Last Friday, markets were knocked lower by news that Goldman Sachs was being charged with fraud by the U.S. Securities and Exchange Commission over its marketing of a subprime mortgage product. After regaining some ground, markets tumbled again yesterday as the Greek debt crisis overshadowed positive earnings reports from many blue-chip companies.

Apple’s second-quarter profit jumped 90% versus a year ago, to $3.07-billion on strong iPhone sales, which also boosted results for AT&T, the iPhone’s exclusive carrier. IBM profit increased 13%, evidence that tech spending is on the rise. Yahoo profit nearly tripled due to a rise in online advertising, its main source of revenue. Amazon reported sales up 46% to $7-billion. Sales in China and India helped Pepsi’s first-quarter profit rise 26%. Visa will pay $2-billion for CyberSource, which provides electronic-payment security for online merchants. Ericsson will buy Nortel’s stake in a South Korean venture with LG Electronics. General Motors is on the road to recovery, repaying $8.1-billion in loans to Canada and the U.S.

Our recommendation

Revisit asset allocation

·        Equities. Stephen Uzielli, Portfolio Manager, Portfolio Advisory Group, says: “In the current environment it is especially important for investors to be disciplined in both asset allocation and sector allocation; as equities have risen substantially over the past year it is likely that equity allocations have shifted beyond the upper limits of desired weightings, making it appropriate to rebalance portfolios by taking some equity profits off the table and reducing exposure to stocks.”

·         Fixed income. Anthony Mentor, Associate, Portfolio Advisory Group, highlights the following recommendations: “Term Call – below benchmark duration; overweight cash. Sector Call – underweight Canada, overweight Municipals and Provincials, and Corporates. Currency Call – recent strength in the Canadian dollar means little upside to foreign currency trades. Alternative Strategies – overweight high yield, overweight Emerging Markets Debt, underweight inflation protected bonds.”

For more information or a copy of our in-depth ScotiaMcLeod Weekly Strategy report, please call:

 Ted Jordan Senior Wealth Advisor 902 896-7740