Ottawa Investment Advisor John Bruce

It Has Been Awhile, But I See a Silver (and Gold) Lining

September 17, 2019

Gold prices have been going sideways since it cooled off in 2014. It had peaked in the late summer of 2011 and surged to an all time high. What caused gold and silver to come out of hibernation?

First, interest rates have declined to all-time lows and rates are even negative in Europe. The Fed decided to stop raising interest rates in 2019 and recently reversed its policy by cutting rates a quarter point.

The broad-based money supply (M3) is now growing at 9%, suggesting easy money is back. Since bonds pay very little interest, gold looks more attractive.

Second, the Trump trade war has destabilized the global economy and created an economic crisis. Gold thrives on uncertainty and instability.

Third, gold and silver look cheap compared with stocks and real estate, which have climbed to near-record levels.

I am not a Gold Bug but I have to recognize that my technical charts on Gold look to higher prices at the same time that Oil and Gas are headed lower. No one likes to be wrong and no one likes to lose money when they are. Its what you do when you realize that your plan is not succeeding that guides your results.

The trend in Oil and Gas is lower and the trend in precious metals is higher. With global economies being disrupted by the escalating US/ China trade dispute, these two trends are becoming more pronounced. The trend is your friend ‘till it ends.

Here is how we can capture the trend. For smaller accounts the most effective thing to do is to liquidate at least half of  any energy Mutual funds and switch over to a Precious Metals fund. For medium to larger accounts, reduce at least half of the Oil and Gas companies and we pick up Precious metals Exchange Traded Funds (ETFs) and a few small cap juniors. If this move accelerates, the large caps go up the ETFs give you diversification as do the Mutual Funds and the juniors give you some higher octane potential.

We have many things accelerating the desire for gold globally. Chinese demand for gold is increasing as shown by the Peoples’s Bank of China is still buying (1) India’s ban on the 500 and 1,000 Rupee Notes in 2016 created havoc in India and their demand for gold accelerated (2) Inflation is rising in the US. It reached a high of 2.9% in June and July Inflation forecasters are calling for 2.7% by year end 2019

All of this is supportive of adding gold to your portfolios. I would suggest 5 to 7% to start and then see if it accelerates. If and when Oil and Gas prices should move up we may then consider reallocating dollars back into it. For now, oil is a down and looks to be going lower.

 

Please call me direct at 613-491-3344 or toll free at 1-866-860-4190 to discus further.

 

Best Regards,

 

John S. Bruce

Investment Advisor

CI Quarterly Client Letter 2019 Q2

September 17, 2019

I hope this letter finds you well and enjoying some long-awaited summer weather. I am writing to provide details on how investment markets have performed in recent months and some perspective on some of the broad trends affecting your portfolio.

Coming off a very strong start to the year in the first quarter, global capital markets continued to chart a generally positive course through the second quarter of 2019. Although ongoing trade disputes unsettled investors for much of the period, equity markets around the globe moved higher, while bond prices also climbed as central banks maintained an easy monetary policy stance.

In Canada, the S&P/TSX Composite Index benefited from strength in the materials and information technology sectors to generate a return of 2.6% for the quarter, bringing the equity benchmark’s overall gain to 16.2% for the year-to-date. In the U.S., the S&P 500 Index reached new all-time highs early in the quarter and finished the three-month period 2.2% higher in Canadian dollar terms. Most overseas equity markets also registered modest gains, and the MSCI World Index added about 1.9% for the quarter, also in Canadian dollars.

The equity market rally was supported, in part, by continued low interest rates in North America and abroad. The U.S. Federal Reserve kept its target interest rate unchanged and indicated the possibility of a rate cut in the second half of 2019, prompting the U.S. 10-year government bond yield to decline through the period. As expected, the Bank of Canada also maintained its overnight lending rate of 1.75%, noting that economic growth had been slower than initially anticipated at the beginning of the year. This was positive for bond prices and the FTSE Canada Universe Bond Index, a broad measure of Canadian government and corporate bonds, returned 2.5% for the second quarter.

Many of the conditions that have supported market growth in recent years such as low interest rates, measured economic growth and expanding corporate earnings are expected to continue in the near term. Nevertheless, the current recovery has not been without temporary corrections or bouts of volatility. I continue to believe that a professionally managed, diversified portfolio that is suited to your time horizon and tolerance for risk remains the best strategy for managing risk and helping you achieve your financial goals.

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- Investment Advisor

613-491-3344 0r Toll Free 866-860-4190

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