Jordan Wealth Management Group - ScotiaMcLeod Truro

Since the last time…

I was taught that if you have nothing good to say… say nothing at all. So that’s it for this month’s newsletter.

Seriously though, there is always something good to say if you look hard enough. Since my comments last month, the large majority of companies in the S&P 500 have reported their second quarter earnings – and of these, 76% have recorded positive earnings surprises. It bears reminding that a good portion of the US companies in the S&P 500 are multinationals, and they benefit from sales outside of the US. Corporations by and large have stronger balance sheets and many can afford to raise dividends or buy back their stocks. As for Canada, we continue to be attractive to foreign buyers – with our markets taking up a larger percentage of their global allocations. This obviously is supportive of prices. TED spreads (indicating the cost and availability of capital for companies to borrow) have improved a bit over the past month; as has the Baltic Dry Index up 20% in August.

Now that earnings are out of the way, the markets focus will shift towards economic news again. The Federal Reserve made decisions and comments that they would take their time about removing the stimulus they have put in to the system, admitting that they were uncertain as to the future, and markets chose this as a reason to sell off last week – why anyone was surprised that the future still faces some strong headwinds is beyond me, however!

As one result; forecasters who a year ago were calling for rates in the US to start to rise by now are now pushing this expectation out a year … or five.

The market can’t really make up its mind. Markets will continually be moved by confidence – and confidence right now is low – we need some catalyst to change this – Some positive news on jobs growth or housing price bottoming in the US would be nice, in the short term, some are looking for decent back-to-school sales as an indicator of what Christmas sales will be like.

In the news today – China is expected to surpass Japan as the word’s 2nd largest economy. Look out a bit further however, and it looks like India will surpass them – as India has not had the restrictive one child to a family policy that will slow their growth as their population ages. In the meantime, that’s not necessarily a bad thing – look at the following picture!

My bottom line for now – same as it was last month – invest for the longer term; and ask yourself – who makes more money; those who own the bank, or those who lend their money to the bank?