Ottawa Investment Advisor John Bruce

Positive Markets Despite Gloomy Headlines; A Look Back at 2010

January 1, 2011

A look back at Fourth Quarter of 2010

The information in this letter is derived from various sources, including CI Investments, Signature Global Advisors, Harbour Advisors, Morningstar Canada, Globe and Mail, National Post, Scotia Economics and Bank of Montreal Economics. Index information was supplied by TD Newcrest.

As we review 2010, one is struck by the divergence between the year’s gloomy headlines and the generally positive results shown by the financial markets. Some of the challenges facing the global economy during the year included the effects of the major oil spill in the Gulf of Mexico and ongoing concerns that some European governments will default on their debts. These joined lingering problems in the U.S. economy, including high unemployment, slow growth and an expanding government deficit. Nonetheless, many of the world’s major stock and fixed-income markets made gains during the year.

In Canada, the S&P/TSX Composite Index benefited from strength in commodities such as gold, oil, copper and potash to become one of the world’s best-performing markets. U.S. equities also moved up, with sectors such as industrials and consumer discretionary products among the leaders. It’s worthwhile to note that those sectors are cyclical – they perform best during a period of economic growth. Overseas, equities in emerging markets and Asia also rose, while European stock markets were mixed. Equity indexes in those countries with the biggest debt problems were down for the year.

Why have so many markets rallied despite what seems to be an inhospitable environment? Stock markets are a leading indicator – they tend to anticipate future developments rather than reflect what is happening now. Judging by the results of the past year, equity market investors are expecting continued recovery and growth.

Indeed, there are several factors supporting a positive outlook. The economy has continued to grow in all major regions of the world in 2010, including Europe. Although government and consumer debt levels are a concern, many corporations are in good shape, with strong balance sheets. This has left them well positioned to take advantage of some of the key trends in the global marketplace – such as the robust growth in emerging markets. Bond markets are also pointing to a strengthening economy, as indicated by the increase in U.S. bond yields in the fourth quarter.

Of course, events may conspire to change this outlook. That is why I suggest investing according to a sound financial plan, having a diversified portfolio tailored to your individual circumstances, and maintaining a long-term view for your equity investments.

I have enjoyed the opportunity of working with you over the past year, and look forward to our continued relationship in 2011. I wish you and your family all the best for the coming year.

Should you have any questions about your portfolio or the outlook for capital markets, please give me a call toll free at 1-866-860-4190 to discuss your concerns.


John S. Bruce
Ottawa Investment Advisor
Also licensed in ON, BC, AB, QC, NS
Mackie Research Capital
Direct Line- 613-425-3732
Toll Free- 866-860-4190

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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