Ottawa Investment Advisor John Bruce

December 2014 Client Letter

January 15, 2015

I would like to wish you a happy, healthy new year and to thank you for the opportunity to continue working with you as your financial advisor. This letter will provide you with a brief update on financial markets and my thoughts on what may lie ahead.

The global economy in aggregate continued to strengthen in 2014, although the improvement, as has been the case through most of the current recovery, was uneven. After shrinking in the first quarter, the U.S. economy grew at a much stronger rate than expected in the second half of the year. While not as robust, Canada’s economy also registered encouraging signs of improvement during 2014. In other regions, geopolitical events such as conflict in Ukraine and the Middle East, slower growth in China and the risk of deflation in Europe affected financial markets. Overall, the global expansion moved cautiously forward.

Global financial markets also started the year on a hesitant note, but benefited from improving economic trends and strong corporate profits through the spring and summer months. Most equity indexes were positive through the end of the third quarter, but volatile conditions surfaced in the fourth quarter as investors began to focus on the slowing pace of growth in emerging markets, particularly China. Concerns about oversupply in the energy market caused a sharp drop in the price of oil and other commodities, which was felt broadly across many markets and sectors. The price per barrel of crude dropped to less than US$50 at the start of 2015, the lowest since 2009.

Canada’s commodity-heavy S&P/TSX Composite Index was particularly volatile in the fourth quarter, staging a series of sharp declines and rebounds. The Canadian index finished the three-month period with a loss of 1.5%, but registered a respectable gain of 10.6% for the year. The falling price of oil, which is a major Canadian export product, also caused the Canadian dollar to lose value relative to the U.S. dollar. The loonie finished the year about 8% lower at 86.2 cents U.S.

The MSCI World Index, which measures large and mid-cap equities across 23 developed markets, gained 5.5% for the year in U.S. dollar terms. Accounting for the Canadian dollar’s decline, however, this gain was magnified to 15.1% for Canadian investors. The performance of the World Index reflected generally weaker results in emerging and developed markets outside North America and the robust gains for U.S. equities. The benchmark S&P 500 Index benefited from strong U.S. economic trends, growing consumer and business confidence and healthy corporate profits, adding 13.7% in 2014. Again, Canadian investors in
U.S. stocks benefited from the decline in the value of our own currency, with the U.S. market up 24% in Canadian dollar terms.

Turning to fixed-income markets, the moderate pace of global economic activity in 2014 meant that monetary policy remained highly accommodative to growth. Although the U.S. Federal Reserve officially ended the asset purchase programs it had used to stimulate the economy since 2009, central banks in Europe, China and Japan took steps to keep interest rates low, their currencies weak and their export markets competitive. Bonds performed well in this environment. The FTSE TMX Canada Universe Bond Index, a measure of Canadian government and investment-grade corporate bonds, added 2.7% in the fourth quarter for a gain of nearly 8.8% for the year.

As we head into 2015, the global economy continues to slowly expand. Although interest rates remain low, there are some indications that rates, at least in North America, could begin to move higher in the coming year, which could be a headwind for fixed-income investments. Nearly six years after the financial crisis, equities have delivered generally positive results, but markets are cyclical, and it is always difficult to predict their direction in any given year. While the sharp drop in oil prices has weighed on the Canadian equity market in particular, it is important to remember that asset classes, industry sectors and geographic markets often move in divergent directions. Lower oil prices, for example, can be positive for other sectors as they strengthen consumer confidence and reduce costs for manufacturers, transportation companies and related industries.

In my view, recent market events support the case for maintaining a portfolio that is well diversified across asset classes, geographies and industry sectors. Diversification will help to maximize returns for your portfolio, while mitigating risks as they occur, including currency and interest rate movements.

I hope you find this overview helpful. We work hard to develop the portfolio that best reflects your long-term financial goals and tolerance for risk. Should you have questions about your investments or any other issue, please feel free to give me or my assistant, Kim O’Leary a call. We wish you all the best in 2015.

Sincerely,

John S. Bruce
Senior Investment Advisor

 

This letter was taken from CI Investments.  The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bank of Montreal Economics, and Trading Economics. Index information was provided by TD Newcrest and PC Bond. This material is provided for general information and is subject to change without notice

Mackie Research Capital is a national investment firm with offices in Vancouver, Calgary, Regina, Toronto and Montreal.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (“MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. This newsletter is intended for distribution only in those jurisdictions where both the author and MRCC are registered to do business in securities. Any distribution or dissemination of this newsletter in any other jurisdiction is strictly prohibited. MRCC and its officers, directors, employees and their families may from time to time invest in the securities discussed in this newsletter. ©2014 Mackie Research Capital. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

 

October 2014 Client Letter

November 4, 2014

I have been telling clients for well over the last year to be braced for at least a 10% market correction, not because of serious fundamental concerns over the economy or market valuations, but rather because they happen a lot.  It’s never fun when it occurs, but it appears that the much anticipated correction has arrived.

Over the last 20 years, markets have had a 10% correction each year more than 60% of the time.  The U.S. market in particular has gone well over two years without such a correction while at the same time racking up significant appreciation since early June 2012. So, this correction seems overdue. *

That said, it is important to understand what’s driving it: is it a technical correction or a more fundamental market pullback?  At this point I believe that this is the more frequently occurring technical pullback.  In short, this is what equity markets tend to do.

Some points to ponder:

The U.S. economy remains strong in spite of the relative weakness in Europe.

  • Generally positive recent U.S. economic numbers
  • Low gas prices and improving employment should create the conditions necessary for continued consumer spending

Canada should benefit from a strengthening U.S. economy; however, the notable decline in the price of oil has adversely impacted market sentiment.

I believe that European economic weakness will correct and we will see an improving European economy over the next 12 months. Reasons for this include:

  • The European Central Bank has recently begun implementing monetary stimulus through the Targeted Longer-Term Refinancing Operations (TLTRO) and Asset-Backed Securities (ABS) purchases program that could total US$1 trillion.
  • It takes time for that stimulus to work its way through the system
  • After recent significant US$ strength, a weaker Euro should serve as a tailwind for the European economy.
  • The oft-cited  bad industrial production number for Germany in August was affected by a difficult seasonal adjustment due to an unusual number of holidays in the month
  • Preliminary data indicates that German production bounced back in September

Additionally, in the bond market, it is important to note that the drop in the 10-year treasury yield in North America over the last month was likely due to several factors:

  • Weaker, but not awful, global economic data, has helped drive the expectation of lessening demand for energy commodities
  • The drop in input commodity prices which have lowered the global inflation expectation
  • Bond yields which have moved in concert
  • The concern over the prospects of non-U.S. economies relative to the U.S. has fueled a classic flight to quality
  • Low bond yields in Europe, the German Bund in particular, continue to anchor global rates.

I will be watching the current environment very closely, but view this as a “buy the dips” opportunity.  Unfortunately for all of us, this is what “buy low” almost always feels like.

If you have any concerns regarding this market correction and wish to discuss how it is impacting your investments, please call me directly toll free at 1-866-860-4190 or 613-491-3344.

*Forbes Magazine- Article by Jim Stack, September 24, 2014

Sincerely,

John S. Bruce

Senior Investment Advisor

This letter was taken from CI Investments.  The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bank of Montreal Economics, and Trading Economics. Index information was provided by TD Newcrest and PC Bond. This material is provided for general information and is subject to change without notice

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (“MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

January 2014 Client Letter

January 22, 2014

The past year was a rewarding one for many equity investors, as most major stock markets around the world registered surprisingly strong gains against a backdrop of an improving global economy. Prices for many fixed-income securities such as government bonds were down slightly, however, in response to the growing likelihood of higher interest rates.

In economic developments, steady improvement in the United States in areas such as employment, housing and manufacturing throughout 2013 allowed the U.S. Federal Reserve to announce a gradual withdrawal of its extraordinary stimulus measures, which have kept interest rates at historic lows and supported the economy since 2009. Elsewhere, growth remained moderate across other developed economies, with Europe emerging from recession in the second quarter of the year. Several emerging markets experienced a slowdown, though their growth rates continued to be positive. Overall, business conditions remained supportive and some of the risks that had earlier dampened the recovery began to recede.

These developments boosted investor confidence and supported the gains in share prices, particularly in the latter half of the year. Japan’s market advance was the best in the developed world, as central bank stimulus and strong profits helped to propel the Nikkei Index an incredible 57% higher for the year. The S&P 500 Index in the U.S. soared 32% to a record high and its best annual performance since 1997. The MSCI World Index added 24% and the MSCI Europe Index rose 22%, reflecting the brighter prospects for the region. Results for several emerging market bourses, however, were weighed down by the anticipation of higher interest rates and the heavy cost of structural reforms in their local economies. China’s Shanghai Index dipped 7%, and the MSCI Emerging Markets Index slid 5% for the year. (All returns are in local currency terms.)

Canadian stocks overall posted double-digit gains in 2013, but underperformed both the U.S. and world markets for the third year in a row. The benchmark S&P/TSX Composite Index rallied toward the end of 2013 to gain 13% for the 12-month period, with strong results from health care, industrials and consumer discretionary stocks and weakness in the materials and utilities sectors. The Canadian dollar, meanwhile, lost about 6.5% versus the U.S. dollar, providing an additional benefit to those with global investments.

Yields of fixed-income securities increased in 2013 in reaction to the improving U.S. economy and Fed signals that it would be reducing or “tapering” its economic stimulus policies. For example, the yield of the 10-year U.S. Treasury bond finished the year near 3.0%, up from about 1.6% in late May. The flip side of rising yields is declining prices for interest-rate sensitive securities, including government bonds, many corporate bonds, and real estate investment trusts. The DEX Universe Bond Index, which measures the value of Canadian government and investment-grade corporate bonds, was down 1.2% for the year.

While equities may not match their stellar returns of last year, many of the conditions that have supported market advances remain in place for 2014. Any rise in interest rates is widely expected to be moderate, economic growth is still positive, and inflation remains under control. A diversified portfolio that is tailored to your individual investment objectives allows you to participate in the potential for further gains while helping to protect your investments from market corrections.

In closing, I would like to wish you and your family all the best for the year ahead, and to remind you that Kim and I are just a phone call away. Should you wish to discuss your investment portfolio in greater detail, please contact me directly, toll-free at 866-860- 4190.

Sincerely,

John S. Bruce

Senior Investment Advisor

This letter was taken from CI Investments.  The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bank of Montreal Economics, and Trading Economics. Index information was provided by TD Newcrest and PC Bond. This material is provided for general information and is subject to change without notice

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

 

October 2013 Client Letter

October 28, 2013

The world’s stock markets posted strong returns in the third quarter of 2013, staging a healthy rebound from the summer’s lows. As they have for several years, fixed-income markets continued to be driven by central bank policy, and they had mixed results for the period.

Bond yields rose and prices declined throughout the three-month period due to widespread anticipation that the U.S. Federal Reserve would scale back or “taper” its US$85 billion per month asset purchase program. In September, however, the Fed confirmed that it was leaving the program unchanged, awaiting further evidence of the economic recovery’s sustainability. The yield on the 10-year U.S. Treasury had climbed to 3.0% by mid-September (up from about 1.6% in late May), but began falling after the Fed’s announcement and finished the period at 2.6%.

Prices for other interest rate-sensitive asset classes, including investment-grade and high-yield corporate bonds, and real estate investment trusts, had also declined in tandem with the spike in bond yields, but regained some ground late in the third quarter. The DEX Universe Bond Index, which represents Canadian corporate and government bond prices, eked out a gain of 0.1% for the three-month period, though it was still down 1.6% for the year-to-date.

Global equity markets, meanwhile, were buoyed by continued modest economic growth, low interest rates and the Fed’s commitment to its stimulus program. U.S. stocks as measured by the S&P 500 Index reached a record high during the quarter, adding 5.2% for the three months and bringing its gain to 19.8% for the first nine months of the year (in U.S. dollars). Overseas, European bourses added to their gains for the year despite the difficult economic conditions in much of the region. In Asia, Japan’s Nikkei Index continued to move up, posting a world-leading return of 39.1% for the year-to-date. Investors also shrugged off their concerns about emerging markets, as these regions rebounded with a positive return for the quarter.

In Canada, the S&P/TSX Composite Index rose 6.3% on the strength of gains in every sector except utilities. Materials and financial stocks in particular helped the market, as commodity prices turned around, helping to lift metals and mining shares, and Canadian bank stocks rose with strong earnings reports during the quarter.

It has now been five years since U.S. investment banking firm Lehman Brothers failed in September 2008, triggering the global financial crisis. Although effects of the crisis still linger, the good news is that the world economy is gradually healing. Over the past five years, the coordinated efforts of governments and central banks to return confidence to the financial system have been largely successful. The global economy remains on a path of slow growth, while corporate profits, employment and housing data have shown improvement. Inflation remains under control.

Equity markets have recovered strongly since the crisis, though with high levels of volatility. Markets remain sensitive to short-term disruptions, such as the U.S. government shutdown in the first week of October. In fact, the last five years have been an excellent time to be investing. For the five-year period ending September 30, 2013, the S&P 500 had an average annual compound return of 9.4% and the MSCI World Index, 7.8%. The S&P/TSX Composite Index lagged but still had a respectable return of 4.8% (all returns in Canadian dollars). This shows how maintaining a disciplined and diversified investment program can succeed, even through incredibly difficult conditions.

As we enter the final quarter of this year, I remain focused on helping you create an investment portfolio that is best suited to your long-term goals, based on your unique circumstances and risk tolerance. Should you have any questions about your investments, please do not hesitate to contact my office toll free at 866-860-4190.

Sincerely,

John S. Bruce

Senior Investment Advisor

 

This letter was taken from CI Investments.  The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bank of Montreal Economics, and Trading Economics. Index information was provided by TD Newcrest and PC Bond. This material is provided for general information and is subject to change without notice

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

July 2013 Client Letter

July 15, 2013

After more than four years of trying to boost its economy through extremely low interest rates and other measures, the U.S. Federal Reserve declared a tentative victory in the second quarter of 2013. Cheered by strong jobs and housing data, Fed Governor Ben Bernanke suggested that it may begin to scale back its massive bond-buying program, known as quantitative easing, later this year and allow interest rates to rise in 2014.

However, global capital markets reacted to the Fed’s move with a sharp drop in prices as the second quarter drew to a close. Concerns about a credit crunch and slowing growth in China contributed to the pullback. Government bond yields rose sharply, with the yield for the 10-year U.S. Treasury bond climbing to its highest level in more than a year. Prices for high-yield and investment-grade corporate bonds and real estate investment trusts also moved lower as investors became more concerned about valuations. Prices for many commodities, including oil, copper and other base metals, were weighed down by the outlook for  Chinese growth. And gold, which many investors held as a hedge against inflation or market volatility, lost more than 20% of its value during the quarter.

For many stock markets, the drop in June was not enough to offset earlier gains. U.S. equities as measured by the S&P 500 Index finished the second quarter with a rise of 6.5% and most European bourses also managed modest increases in Canadian dollar terms. Japan’s stock market continued to benefit from central bank efforts to inflate the country’s economy and boost exports, finishing the three months 8.4% higher. Emerging market equities, however, were dragged down by the prospect of higher U.S. interest rates, China concerns and weaker commodity prices. The resource-heavy Canadian market, as measured by the S&P/TSX Composite Index, shed 4.1% and Australia’s market lost 10.8%.

For the first six months of the year, the S&P 500 in the U.S. was up an impressive 20.3%, while the MSCI World Index, representing global stocks, was up 14.9%. (As these returns are in Canadian dollars, they also reflect a decline of more than 5% in our currency relative to the U.S. dollar over that time.) Meanwhile, the Canadian market continued to lag, returning -0.9% over the six months.

Bond markets did not fare as well as stocks in the first half of the year. Thanks to rising yields, the DEX Universe Bond Index declined 2.4% during the quarter and 1.7% for the year-to-date.

The reaction to Bernanke’s comments seemed counter-intuitive, as market moves often are. He was acknowledging that the U.S. economy has made great strides since the financial crisis of 2008, making monetary stimulus less necessary. The positive trends in the economy, including low inflation, healthy corporate earnings, improving employment and the surprising strength in housing, are factors that should support U.S. capital markets. And although other regions, including Europe and China, continue to work through structural and financial issues, business conditions remain accommodative and global credit markets are functioning well.

As we have seen this year, both market declines – and gains – are unpredictable in the short term. I continue to believe the best strategy for investors is to take a long-term view, investing with care in a portfolio that is well diversified by asset class, geography and industry sector and which suits your tolerance for risk.

If you have any questions about your portfolio results or your overall financial plan, please do not hesitate to contact my office. In the meantime, I hope you and your family have a safe and happy summer.

Sincerely,

John S. Bruce

Senior Investment Advisor

This letter was taken  from CI Investments.  The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bank of Montreal Economics, and Trading Economics. Index information was provided by TD Newcrest and PC Bond. This material is provided for general information and is subject to change without notice

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

A look back at 2012, a look forward at 2013

January 23, 2013

Global financial markets provided strong returns in 2012, despite a litany of negative headlines about government debt problems in Europe and the United States and the slowing pace of growth in many regions. In the end, the global economy has continued on its path of gradual recovery from the financial crisis of four years ago, with improvements seen in key areas such as U.S. employment and housing.

World stock markets started 2012 on an encouraging note before declining through the spring and then recovering to post impressive gains. In the U.S., the S&P 500 Index reached 1,426 points, an increase of more than 100% from its low of March 2009. It was up 13.4% for the year. The MSCI World Index also rose, returning 14.0%. Despite persistent debt concerns in the Eurozone, the MSCI Europe Index returned 17.3%. (All index returns are reported in Canadian dollars.) Stocks in Asia also posted healthy increases, although China’s Shanghai Index proved to be one of the weaker performers, as slower growth rates and a change in political leadership in that country helped to cool stock prices.

Here at home, Canadian equities as measured by the S&P/TSX Composite Index finished the year with a gain of 4%. This result, though very positive, meant that the Canadian market underperformed many of its global counterparts for the second year in a row, underscoring the importance of a globally diversified portfolio. The moderate pace of global growth kept more defensive sectors such as health care, consumer staples and financials in favour, while the more cyclical industries that dominate the Canadian market, such as materials and energy, lagged.

Much of the optimism in financial markets during 2012 was fuelled by significant announcements from central banks in the U.S. and Europe. In the first quarter, the European Central Bank’s long-term refinancing operation provided more than one trillion euros to support Europe’s banking system and boosted investor confidence. Later, the ECB announced a plan to buy vast amounts of government bonds to support indebted countries such as Spain and Italy. The U.S. Federal Reserve also made several key stimulus announcements. In mid-December, it said it would keep interest rates near zero by purchasing US$45 billion in Treasury securities each month until the U.S. unemployment rate fell below 6.5%.

While major policy announcements sparked market rallies, investors nonetheless remained relatively cautious. Government bond yields in Canada and the U.S., which move inversely to prices, reached historic lows in July and remained low towards the end of the year, reflecting the continued popularity of this asset class. Investment-grade and high-yield corporate bonds also recorded good returns, as investors continued to seek income-producing investments.

Looking ahead, the global economy appears set to continue its modest growth in 2013. Interest rates and inflation are expected to remain low. However, significant economic challenges remain. Although U.S. politicians reached a compromise in early January to soften the impact of the “fiscal cliff,” difficult decisions over government spending must be made in the coming weeks and months. Similarly, policymakers in Europe must continue to work to contain and resolve the region’s ongoing sovereign debt problems.  What we have seen, however, is that businesses can grow and create wealth and capital markets may continue to provide gains, despite such overhangs.

In closing, I would like to take this opportunity to express my gratitude for your business and trusting in me during these turbulent and volatile times. Should you have any questions about your investments or the outlook for the coming year, please contact me directly, toll free at 866-860-4190 or direct at 613-425-3732. In the meantime, I wish you and your family all the best for the coming year.

 

Sincerely,

John S. Bruce

Senior Financial Advisor

The information in this letter is derived from various sources, including CI Investments, Signature Global Advisors, Globe and Mail, National Post, Financial Times, Bank of Montreal Economics, Trading Economics and Morningstar Canada. Index information was provided by TD Newcrest and PC Bond. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (”MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

 

 

A Look Back at the First Quarter of 2012

July 11, 2012

After a promising start in the first quarter, capital markets became increasingly volatile in the second quarter, as Europe’s debt crisis escalated once again and weaker global economic activity caused investors to take a more cautious tone.

In the Euro zone, Greece and Spain were among the chief sources of investor concern. Worries that Greece, which continues to struggle to meet its debt obligations, might make a disorderly exit from the monetary union persisted until general elections provided some stability in mid-June. At the end of June, Euro zone leaders reached an agreement that included providing funds directly to struggling banks, rather than funneling it through member governments. The deal was seen as a very positive development, especially for Spain and its troubled banking system, and prompted a rally on global stock markets.

While the pace of growth in emerging economies continued to moderate, it remained relatively strong, with China’s economy growing at an estimated 7.5% annually. The Chinese central bank cut interest rates in the second quarter to ensure that this growth rate is sustained.

U.S. growth remained positive, but also slowed in the quarter. One explanation was that the unusually warm winter resulted in significant economic activity taking place earlier than normal – resulting in a stronger first quarter and a weaker second quarter than had been expected. Prices for commodities such as oil and copper dropped in response to the slowdown. The U.S. Federal Reserve, acknowledging the need for continued economic stimulus, extended its “Operation Twist” bond purchase program to the end of the calendar year. Canada also continued to experience modest economic and employment growth.

The renewed uncertainty once again led investors to seek security in higher-quality government bonds, and yields for 10-year U.S. and Canadian bonds dropped to record lows. Several major equity markets lost ground for the period, including Canada’s, which is heavily weighted toward commodity producers and financial services companies. The benchmark S&P/TSX Composite Index declined 5.7% for the quarter and was down 1.5% for the first six months of this year.

The U.S. equity market remained a bright spot, with the S&P 500 Index declining just 0.8% for the quarter and gaining 9.4% for the year-to-date (in Canadian dollars). This reflects America’s relative stability and the strength of U.S.-based corporations. This helps to remind us that, through the companies in which you have invested, you are buying ownership stakes in individual companies – not markets – and that healthy, profitable and growing companies abound today, despite the gloomy headlines.

The challenges for investors are likely to continue for several months as developed and emerging economies tackle their complex fiscal issues. Although the global economic recovery continues, capital markets remain sensitive to every piece of news.

For that reason, I believe the best strategy is to take a long-term view, investing with care in a portfolio that is well diversified by asset class, geography and industry sector and which suits your tolerance for risk.

If you have any questions about your portfolio or your overall financial plan, please do not hesitate to contact me at 1-866-860-4190. These are very difficult times, but they too shall pass and the markets will resume their traditional direction and prosperity will return. Thank you for your business and I hope you and your family have a safe and happy summer.

Sincerely,

John S. Bruce
Senior Investment Advisor – Private Client Division
Mackie Research Capital

The information in this letter is derived from various sources, including CI Investments, Signature Global Advisors, Globe and Mail, National Post, Wall Street Journal, Bloomberg, Bank of Montreal Economics, Trading Economics, and the Big Picture. Bloomberg is the source of the index information in paragraphs 5 and 6. This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation (“MRCC”). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des épargnants.

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