Jordan Wealth Management Group - ScotiaMcLeod Truro

The terrible earthquake that shook Haiti has caused enormous loss of life, as well as an expensive and long-term rebuilding plan for that country. Scotiabank has 85 employees in Haiti and we are thankful they are all safe and accounted for. This is a very difficult time for them and their families. Our thoughts are with the people of Haiti who have been affected by this catastrophic event. Canada should hold its head high, claiming the highest per capita donations to aid in the relief effort. I am proud to point out that on a local level, my Rotary club has been able to affect the provision of at least 20 shelterboxes to Haitian families. For more information, log on to www.shelterbox.ca

Equities kicked off 2010 with January losses of 3.7% for the S&P 500 and 5.6% for the TSX. Even the high-flying emerging markets saw the MSCI EM index decline by 6% in January. The declines were offset by gains in government bonds of 1.7% and corporate bonds of 2.2% in January.

The FOMC declared for the first time the U.S. economy is in “recovery" and took several steps to prepare investors for the removal of aggressive monetary stimulus. The FOMC upgraded its economic outlook, reaffirmed it will end liquidity backstops and implemented a $1.25 trillion program to buy mortgage-backed securities.

As of January 29th, 221 companies in the S&P 500 have reported their fourth quarter financial results. Almost 80% of the companies that have reported their earnings so far announced positive earnings surprises over analysts’ expectations.

President Obama has put a sobering price tag on the financial crisis and the ensuing recession – a record-shattering $1.6 trillion (U.S.) deficit for 2010. He projects that 2010 will be a high watermark for the deficit – representing 10.6% of the country’s gross domestic product – the broadest measure of the economy. By 2014-15, the White House foresees both the debt and deficit declining to a more manageable 3.9% of the economy.

The U.S. Administration has proposed new rules regarding the size and activities of the large banks. Under the proposal, banks would be limited in their ability to take bank deposits, as well as operating a trading operation. The proposal to limit size/activities of banks combined with the recently proposed “bank tax" highlight the immense political scrutiny of the industry. Needless to say, there will be much posturing and lobbying to minimize the effects on banks’ profitability, and the outcome could have effects on future dividend policies. I will be watching developments closely in this area!

STRATEGY:

I am not at all surprised to see the markets take a bit of a breather in January. I continue to expect that equities will outperform bonds, and bonds will outperform cash in 2010. It will be a transition year as the coordinated global government stimulus taps are turned off and the private sector takes over. Volatility is a given, but modest single digit returns are expected for the year and stronger growth is expected in 2011 and 2012. I continue to recommend holding on to good companies, and buying the dips for companies that you would like to own if they became cheap enough for a time.

Your asset allocation should reflect your needs.

SHORT TERM CASH:

If you have lump sum cash requirements for the next twelve months that you have not set aside funds for, I would recommend you do so.

ON-GOING INCOME:

We purchase GICs from 14 CDIC institutions. Let us shop for the best rate for you.

Insured annuities are another option that offers the potential to significantly increase your after-tax income while preserving the value of your estate (works for non-registered funds only) – please contact us if you want further information tailored to your circumstances.

Floating Rate Preferred Shares: These offer tax efficient dividend income along with a rising rate paid out tied to bank prime rates. There are a limited number of issues trading in the market. Let us know if you have an interest in this area as interest equivalent returns are often twice that of a traditional GIC.

LONG-TERM GROWTH:

Please always remember that while it is my strong belief that this is the portion of your savings that will provide the highest returns over time, it also exposes you to the greatest risk, IF you have to sell it at the wrong time.

Please call me on any issues regarding this communication. I am grateful for my relationship with you and am most appreciative of referrals where you believe my services may be of benefit.

This article is for information purposes only. All performance data represents past performance and is not indicative of future performance. It is recommended that individuals consult with their Wealth Advisor before acting on any information contained in this article. ScotiaMcLeod does not offer tax advice, but working with our team of experts we are able to provide a suite of financial services for clients. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.