Jordan Wealth Management Group - ScotiaMcLeod Truro

What I am hearing and observing since last time:

I had the good fortune to speak personally to Scotiabank’s VP and Chief Economist, Warren Jestin late in March when he was guest speaker at our local Chamber of Commerce’s Annual Dinner. I was left with the belief that the benefits (and risks) to Canada from the developing markets growth (China, India, Brazil) are real and will be enduring. In the meantime, however – real caution is warranted, and taking some profits on commodity stocks that have had such a great run would not be a bad decision.

In terms of our exchange rate relative to the US dollar, there is without a doubt a “good feel” for the Canadian dollar globally – there is a lot of money around the globe looking for a place to call home, and Canada doesn’t look so bad relative to Europe or the States. If our interest rates increase as we expect then to do in the second half of this year –

This month marks the official anniversary of the "market low" witnessed last year when the TSX closed at 7567.  Certainly few investors expected the markets to be up 58% since then, but here we are more than half way back to the market highs we saw in June 2008. Admittedly we likely should never have been above 15,000 since oil prices were far too high, but the tolerance for risk has increased over the past 12 months as the market has become much more comfortable with the recession being over and the economic recovery under way.

The bull market that commenced in March 2009, has just marked its first anniversary. A summary of the movements of major global stock markets for the past 12 months is provided in the table below, along with the change in our Canadian dollar.

With major markets up considerably in the twelve-month period in their local currency, Canadian investors did not enjoy the full gain of the global markets because the Canadian dollar strengthened against most currencies over this same time period.  Nonetheless, the returns have given investors a reason to smile again.

BRIC countries such as Russia (+117.5%) and India (+109.0%) were in the lead on the performance rankings, but China (+44.9%) - the first country to commence a bull market advance in November 2008- has slipped badly over the past few months.

Notwithstanding the huge rally since the March lows, only the Chile Stock Market General Index has been able to reclaim its 2007 pre-crisis peak and is now trading 8.4% higher. Mexico and Israel could be the next countries to eliminate the bear market losses. The Dow Jones Industrial index and the S&P 500 Index are still 25.4% and 27.1% (respectively) below their October 2007 bull market peaks.  The S&P/TSX index is still 22.2% off its’ June 2009 high.

Considering stock market performance against the background of economic growth, Northern Trust Economist, Asha Bangalore said: “Real GDP growth across the world is yet to match the noticeable gains seen in equity prices during the past year. The US economy largely held steady on a fourth-to-fourth-quarter basis in 2009. Growth in the European Union fell 2.3% in the final three months of 2009 on a year-to-year basis. Real GDP advanced at a rapid clip in China (+10.7%), while India(+6.1%) and Australia(+2.1%) also recorded gains in real GDP in 2009.”

“Typically, equity prices are leading indicators of economic growth. Based on this consideration, are the sharp upward movements of equity prices over the past year sending a message of robust economic growth in the quarters ahead? The answer depends on the economy in question. With regards to the US economy, while there are many improving conditions, both the credit market headwinds and the weak labor market conditions cast a shadow on the possibility of a strong recovery.”

I continue to see 2010 as a transition year for many of the world’s economies as they ease off (Government) life support. I continue to believe that equities will outperform bonds, and bonds will outperform cash.  I expect that there will be a sector rotation that will result in active management performing better than passive exposure to all sectors as you would achieve through an index fund.

I would not be surprised to see some sort of a pull back anytime now – there certainly is enough negative sentiment out there to make you wonder why the mini correction we went through in January did not last for a bit longer. I do believe that pull-backs should be used to buy into companies or areas you wished you had earlier.

If you have questions, ideas or concerns you  would like to discuss, please call me.

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.

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

December 31, 2009

The decade of 2000-2009 is one I am happy to see gone as an investor – our Canadian stock market is closing out the year at about the same level it was in August 2000!

In the more immediate past, 2009 was one of those years that reminded us what a roller coaster the stock market can be – and also of the dangers of conventional thinking.