Ottawa Investment Advisor John Bruce

August 2017 Update

August 25, 2017

Earnings season is in full swing for this quarter and I am seeing some odd and unusual market gyrations that I wish to comment on. I keep hearing the different talking heads on the business news shows like BNN and CNN talk about how one market is overvalued while another says it is undervalued to be followed up by yet another expert stating the market is fully valued. What is apparent here is that everyone has an opinion and no one knows what the future holds for the markets or anything for that matter.

I see a company report their quarterly results that far exceed expectations only to be sold off dramatically with huge gap down opens that do not give you a chance to exit or a company missing expectations altogether, only to jump higher as well for no positive reason. What my experience tells me is that it may be time to take profits on our winners and stay in cash for a period of time to await the turbulence and volatility to subside.

We are being tripped up by conflict between global leaders with their sabre rattling and bravado, irresponsible politicians introducing tax policies that are historically bad to do to any market and treaties in trade being prepared to be thrown out. In other words, more noise to navigate through to determine what companies are good value, overvalued or undervalued and position ourselves accordingly.

Here are my concerns and how they relate to your holdings; If we choose to sell some of your investments, it will likely mean that we sell those investments that are becoming too speculative, highly overvalued or unrealistically overvalued. The end result is that if we sell off winners you may be left holding investments that may be down at this time but I believe will not only return to positivity but become winners in time. The investment market is not a market to give us instant gratification regularly. I have found that during these times in the market cycle, if the cycle persists or worsens a negative impact will be had on my client’s mindset and create worry, doom and gloom. They will no longer see the winners in black in their holdings as we will have sold them and all they may see are those holdings that are currently down in red. I will hear comments like, “why are we holding these dogs?” or “why do we have so many losers?”

When we sit on cash I invest in the Laurentian Bank BTB High Interest savings account that pays out a competitive interest rate, and is liquid and can be sold and received in one day after selling. I have seldom seen, over the last 20 years, market conditions that would have me sitting on cash deposits longer than six months due to high risk markets. Even after the crash of 2008, we were buying back into the financials within two to three months following the worst market conditions since the crash of 1929. Remember, there is no down side risk to holding cash.

Suffice it to say, I do not feel that the markets are experiencing nor facing anything like we saw in the 2008 crash, but caution needs to be taken and I think that if we do sell off many of our holdings, it will put us in cash to buy back in if larger dips occur.

I will be calling all of my clients to discuss how to implement positive changes to position us to be profitable. Please return my call asap so that we do not delay adjusting our strategy for the future.

If you have any questions about your portfolio or any changes you would like to discuss, please contact my office at 613-491-3344 or toll free at 1-866-860-4190.

Sincerely,

John S. Bruce
Investment Advisor

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, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). 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.

July 2017 Update

July 27, 2017

I hope you have had a good start to the summer and are looking forward to enjoying some warmer weather. I am writing with a brief market recap for the second quarter of 2017, which I hope will provide some context for how your investments have performed over the three-month period.

Most capital market indexes around the world registered impressive gains early in the second quarter before moderating in June, reflecting steady global economic growth and supportive business conditions. The S&P 500 Index, a broad measure of U.S. large-cap equity performance, added 3.1% for the quarter, bringing its gain to 9.3% for the year-to-date in U.S. dollar terms. The MSCI World Index, a benchmark that represents large and mid-cap equity performance across 23 developed market countries, was up 4.2% for the quarter and 11% for the year-to-date, also in U.S. dollars. For Canadian investors, however, gains in global equities were somewhat muted by our dollar’s strength against a number of other major currencies, including the U.S. dollar. In Canadian dollar terms, the S&P 500 was up 0.5% for the quarter, and the MSCI World, 1.6%.

The Canadian equity market noticeably lagged many other developed market indexes, despite strong economic output and employment data. The S&P/TSX Composite Index fell by 1.6% during the quarter, based on softening oil prices, weaker financial shares and investor sentiment that was dampened by trade-related issues with the U.S. The benchmark remained 0.7% higher for the year-to-date. Overseas, strong quarterly results were recorded in local currency terms for larger Asian markets including Hong Kong and Japan, but were offset by weaker results in Europe.

Global fixed-income markets, meanwhile, prepared for the gradual end of ultra-low interest rates. As anticipated, the U.S. Federal Reserve Board raised its overnight lending rate by 25 basis points in mid-June, the second such increase in 2017. The Bank of Canada held rates steady through the second quarter but raised rates at its recent meeting in July, taking confidence from the strong labour market. In this environment, the U.S. 10-year Treasury bond yield drifted lower through much of the second quarter, but climbed higher late in the period and into July as prices declined. The FTSE TMX Universe Bond Index, which measures Canadian government and corporate bond returns, reflected gains of 1.1% for the quarter, with government bonds performing in line with corporate issues.

Capital market volatility has been noticeably absent in the early part of the 2017, despite the ongoing political issues around the world. However, the relative calm, which has been supported by ample availability of credit, may be tested in the coming months if interest rates move higher. Regardless of the short-term moves that the markets may take, it is important to keep in mind your investment strategy, which is based on your individual tolerance for risk and financial goals. If you have any questions about your portfolio or any changes you would like to discuss, please contact my office toll free at 613-491-3344 or toll free at 1-866-860-4190.
Sincerely,
John S. Bruce
Investment Advisor

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, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). 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.

Client Letter Q1 2017

July 12, 2017

The first welcome signs of spring are arriving and we can start looking forward to summer. In reviewing the first quarter of 2017, financial markets in Canada and around the world continued to be lifted by positive momentum, based on the expectation of continued economic growth, low interest rates, and moderately rising inflation.

Although global equity markets were somewhat unsettled during the three-month period, they finished with generally positive results. The MSCI World Index, a broad measure of global equity results, returned 6.5% in U.S. dollars, including dividends, or 5.7% in Canadian dollar terms. The S&P 500 Index in the U.S. reached a new high in early March, and ended the period with a gain of 6.1% (5.3% in Canadian dollars). In Canada, S&P/TSX Composite Index earned 2.4% for the quarter. Although lower oil prices continued to weigh on the Canadian energy sector over the past three months, the index was buoyed by stronger results for the materials, information technology and consumer discretionary sectors.

Overseas markets were also generally positive, with particularly strong results in Hong Kong, Taiwan and several other Asian markets. The exception in the Pacific region was Japan’s Nikkei Index, one of the few global equity markets to lose value in the first quarter. European equities, including markets in London, Paris and Frankfurt, were also up for the period, as were most emerging market indexes.

Global government bond yields dipped through the period as prices rose, and high-yield and investment-grade corporate bonds outperformed. The U.S. Federal Reserve raised interest rates by 0.25% as expected in mid-March, and is on track to make two more rate increases in 2017. Other major central banks in Europe and Japan, as well as the Bank of Canada, however, chose to continue with the looser monetary policy designed to support their economies, and left rates unchanged. The FTSE TMX Canada Universe Bond Index, a measure of Canadian government and investment-grade corporate bonds, returned 1.2% for the three-month period.
The current bull market in North American equities marked its eighth anniversary during the quarter, making it the second-longest bull market in history. U.S. equities as measured by the S&P 500 Total Return Index have gained about 300% since the global financial crisis lows of March 2009, while the Canadian S&P/TSX Composite Total Return Index is up about 143% in value, both in Canadian dollars. Although many of the conditions supporting economic expansion remain, markets rarely continue to rise without temporary corrections or bouts of volatility. I continue to believe that a 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. Should you have any questions regarding your portfolio, please call me toll free at 1-866-860-4190 or 613-491-3344.

Sincerely,

John S. Bruce
Investment Advisor

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, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). 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.

Canadian Currency and Exchange Data

March 10, 2017

Growth in Canada is limited and with interest rates rising in the U.S., the CAN/U.S. exchange is likely going to take the Canadian dollar to new lows. It went through to a new one-year low yesterday and again today. I have already been buying U.S. dollars for you and it looks like that is the smart money move.

Canada- Little growth
U.S.- Increased growth
Canada- Flat interest rates
U.S.- Rising interest rates = falling Canadian dollar and rising U.S. dollar.

This will lend itself to a currency gain and a more robust U.S. market to invest in.

RRSP Steady investment today will bring its reward tomorrow

February 15, 2017

Click here to read When’s the right time to invest in an RRSP?

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