Ottawa Investment Advisor John Bruce

Third Quarter 2018

October 18, 2018

During a period characterized largely by trade uncertainty, global asset markets delivered mixed results for the third quarter of 2018, with the U.S. equity market reaching new highs and outpacing many of its global counterparts.

U.S. equities posted strong results, supported by positive economic data, healthy corporate earnings and favorable business conditions that included corporate tax cuts. The S&P 500 Index, a broad measure of U.S. equities, gained 7.7% for the quarter and was up 10.6% for the year-to-date in U.S. dollar terms. Although the Canadian dollar has lost ground relative to its U.S. counterpart over the course of the year, it strengthened moderately in the most recent three-month period, resulting in a 5.9% quarterly return for the index in Canadian dollars and 14.1% for the year-to-date.

The MSCI World Index, which represents large and mid-cap equity performance across 23 developed market countries, also posted positive results for the period, gaining 5.1% for the quarter and 5.9% for the year-to-date in U.S. dollars. However, much of the gains for the global index resulted from the outperformance of U.S. stocks, as several local markets in Europe and Asia posted moderate losses for the quarter. Emerging markets also continued to sell off on rising interest rate concerns, as they have since early in the year.

The Canadian S&P/TSX Composite Index dipped slightly, losing 0.6% for the quarter, but the benchmark remained up about 1.4% for the year-to-date. The Canadian market’s muted performance for 2018 resulted from weakness in the energy and materials sectors, the uncertainty of trade talks with the U.S. and a slight decline in the value of the Canadian dollar versus the U.S. dollar.

Interest rates continued to move upwards over the quarter. The Bank of Canada left its benchmark interest rate steady at 1.5% in September following a 25-basis point hike in July. The U.S. Federal Reserve, meanwhile, responded to the labour market’s strength and the continued growth of economic activity by raising its target rate to 2% to 2.25%, its highest level since April 2008. Ten-year government bond yields in Canada and the U.S. rose throughout the period, with the FTSE Canada Universe Bond Index, which measures government and corporate bonds in Canada, returning -1.0% for the third quarter and about -0.4% for the year-to-date.

Equity markets around the world have made a strong recovery in the more than 10 years since the global financial crisis, and in August the current bull market became, by some measures, the longest in history. Though the economic cycle is entering its later stages, business conditions in many regions remain constructive, and it is impossible to predict when the next downturn will occur. Some studies, in fact, have shown that attempting to “time the market” by selling your investments before a downturn can be counterproductive, as investors often miss out on significant market gains after they have cashed out. Rather, having a personalized long-term investment plan that reflects your objectives – and staying true to that plan through market highs and lows – typically yields better results.

In closing, I would like to thank you for your business and remind you that Brian and I are here to help. If you have any questions about your portfolio, please feel free to contact my office.
Sincerely,

John S. Bruce

Investment Advisor

The Market is on Sale

October 16, 2018

The market went on sale this week!

When you hear that your favorite store is having a big sale, the reaction should be excitement and enthusiasm and then you check your bank account and you see what you can afford to buy. Right?

Not so if it is the stock market on sale. Many people do the opposite. They freak out, get scared and contemplate throwing out all their favorite items, instead of buying more.

This is the market. This is how it goes. Up and down and up and down and sometimes with such volatility that it can make your head spin.

So what do you do?

You treat it as any other store that decides to have a sale. You evaluate what has great value and you buy more.

What should you not do?
Sit and wait for the sale to end then consider buying.

So with this in mind, please call me asap so I can offer suggestions of what companies are on sale and how we can buy good value.

1-866-860-4190 or direct at 613-491-3344
Sincerely,

John 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.

August 2018 Update

August 8, 2018

August 8, 2018

I hope you are well and are enjoying the warmer weather. I wrote to you three weeks ago about the market environment and the risk that is in the markets. I wanted to provide a brief update for you on what is unfolding now that earnings are being released.

There is an expression that states, “Buy on rumour, sell on news”. Earnings period is a practical application of this belief. As earnings are coming out, many companies are being sold -off by investors regardless of whether the news was really good or mediocre. I tend to see this type of action occurring when the market is getting over extended. That is to say, when the stock indexes have done well and have reached new highs.

Interest rates are rising in the U.S. and the 10 year U.S. Bond Yield hit a high of 3.128% in the middle of July. When bond yields rise, many conservative investors will start to shift out of stocks and into bonds, increasing the number of sellers in the stock market. This puts downward pressure on stock prices.
Add to this the escalating trade war between the U.S. and many other countries and you will have a good argument to take profits if valuations get too lofty, build a good value cash position and dividend paying companies–when the prices start to drop.

When will this happen? Who knows? What I do know is that there is a shift building and that is when I want to keep my eyes out for discounts and value when it happens and have the cash to do it.

I will talk to you if we need to make any adjustments to your portfolio with our existing holdings and let you know when I think the time is right to add to our stocks or even buy some good value bonds.

If you have any questions I will be back in the office on Thursday August 16th. In my absence please direct any inquiries to my assistant, Brian Donegan at 1-844-860-7787.

I wish you and your family a safe and pleasant summer.

Sincerely,

John Bruce
Investment Advisor

Client Letter Q2 2018

July 24, 2018

I hope you are well and are enjoying the warmer weather. With the second quarter of 2018 having recently drawn to a close, I wanted to provide a brief update for you on some of the main themes that emerged for investment markets over the period.

Following a particularly volatile start to the year in the first quarter, many global equity markets delivered somewhat steadier returns in the second quarter. The MSCI World Index finished the period with a gain of 1.9% in U.S. dollar terms, while the S&P 500 Index, a broad measure of U.S. stocks, rose about 3.4%. Overseas results varied, with gains for equity indexes in England, France and Japan offset by losses in Germany and several Asian markets. Emerging markets exhibited the largest drawdowns, with the MSCI Emerging Markets Index losing 7.9% for the three months in U.S. dollars. I saw this coming and we sold our positions before it became negative.

In Canada, the S&P/TSX Composite Index performed well, registering a broad-based advance of 6.8% for the quarter. Stronger oil prices buoyed energy shares, and the health care, information technology and financial sectors all added to performance. The Canadian benchmark has gained nearly 2% for the year-to-date.

The Canadian dollar, meanwhile, declined in value relative to the U.S. dollar over the quarter, enhancing returns in your U.S. RRSP and U.S. TFSA accounts holding assets priced in U.S. currency.  The MSCI World Index, for example, returned 4.1% for the quarter when expressed in Canadian dollars, the S&P 500’s gain was 5.6% and the loss for the MSCI Emerging Markets Index was reduced to 5.9%.

The U.S. Federal Reserve raised its target interest rate range by a quarter of a percentage point for the second time this year at its June meeting, pointing to the continued strength of the labour market and solid economic activity. Economic data for Canada was also strong, but the Bank of Canada opted to hold rates steady through the second quarter, indicating that further increases would likely come later in the year. Ten-year government bond yields in the U.S. and Canada reached a peak for the second quarter in mid-May before declining and finishing the period slightly up. The FTSE TMX Universe Bond Index, which measures Canadian government and corporate bond returns, gained 0.5% for the quarter.

Equity prices in many industries and regions continue to be supported by healthy corporate earnings, relatively low interest rates and strong economic signals. However, challenges in the form of gradually rising short-term rates and inflation, as well as rising global trade tensions, are causing uncertainty in some areas of the market. In this type of environment, the value of strong active portfolio management becomes especially important, as professional Investment Advisors have the knowledge and experience to navigate through challenging market conditions. The escalating trade war that the US Administration is unfolding is very disruptive to the current market. You may find that we have been increasing the cash position in your portfolio. Until some of the impacts of the trade war tension is absorbed, I will be very selective in entering into new positions.

I am taking into account your financial goals and risk tolerances with every decision we make. If you have any concerns about your account or if there have been any changes to your personal circumstances, I would be very happy to discuss them with you – please do not hesitate to contact my office.

I wish you and your family a safe and pleasant summer.
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.

April 2018 Update

April 27, 2018

In contrast to the relative market calm of 2017, volatility returned to equity markets in the first quarter of this year. Most global markets dropped sharply in early February, with some falling into correction territory (a decline of 10% or more). The initial decline was apparently due to market participants’ concern about rising inflation based on strong U.S. economic data.

Though they recovered somewhat over the ensuing weeks, equity indexes remained choppy through February and March, and many finished the period with negative returns in local currency terms. The S&P 500 Index, a broad measure of U.S. stocks, lost 0.8%, the MSCI World Index fell about 1.2% and developed markets in Europe also declined. Markets in Asia were mixed. Canada’s S&P/TSX Composite Index underperformed its global counterparts, losing 4.5% during the three-month period. The Canadian benchmark is heavily weighted toward sectors that exhibited weak performance for the quarter, such as energy and materials. It also has modest representation in information technology, which outperformed.
The Canadian dollar fell 2.7% relative to the U.S. dollar over the first quarter. As a result, many foreign markets were positive when expressed in Canadian dollars. Including dividends, the S&P 500 Index gained 2.0% and the MSCI World Index was up 1.6% in Canadian dollar terms.

After raising rates in January, the Bank of Canada announced it was maintaining the target for its key overnight interest rate at 1.25% at its meeting on March 7. The central bank raised concerns about the heightened uncertainties surrounding international trade. The U.S. Federal Reserve under new Chairman Jerome Powell raised its target range for the federal funds rate by a quarter point to 1.5-1.75% during its March 2018 meeting. This was in line with market expectations, based on a stronger U.S. economic outlook.

U.S. 10-year Treasury yields rose in the quarter, reflecting the market’s expectations for continued growth and higher interest rates, while Canadian government bond yields were up slightly. Rising yields are generally negative for the prices of bonds and other income securities, and as a result, the FTSE TMX Canada Universe Bond Index, which reflects a wide range of Canadian government and corporate bonds, had a gain of just 0.1% for the quarter.

The re-emergence of equity volatility in the first quarter may have surprised some investors, but it represented a return to normal. In fact, 2017 was unusual for its relative stability. During the month of February 2018, the S&P/TSX Composite Index had three trading days in which losses were greater than 1.50%, while 2017 only had two trading days during the entire year in which losses were greater than 1.50%[i] .

It’s important to remember that market declines are a natural part of investing. Such market movements often present experienced portfolio managers with their best investment opportunities, while passive strategies will remain exposed to the fluctuations of the entire market. It’s also worth noting that this bout of volatility was not driven by a change to company fundamentals. Overall, business prospects remain solid, with continued economic growth, strong confidence levels and favourable U.S. tax reforms.
The developments in the first quarter remind us that markets are highly complex, interconnected, dynamic entities. Given that short-term pullbacks are an expected part of investing, I continue to recommend a long-term, diversified strategy tailored to your individual financial goals.

If you have any questions about your portfolio, please contact me toll free at:
1-888-860-4190 or direct 613-491-3344.

John S. Bruce
Senior Investment Advisor
Private Client Division
Direct Line- 613-491-3344
Fax- 613-491-2292
Toll Free- 866-860-4190
Email- jbruce@mackieresearch.com

https://www.creatingwealth.ca

http://www.mackieresearch.com

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. Although every effort has been made to compile this material from reliable sources; no warranty can be made as to its accuracy or completeness, and we assume no responsibility for any reliance upon it. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.
[i] For February 2018, the days are February 2 (-1.61%), February 5 (-1.74%) and February 8 (-1.73%). For 2017, the days are May 17 (-1.73%) and February 24 (-1.53%). There were only 5 days with losses greater than 1% in 2017; for the first quarter of 2018 in total there were 11 days with losses of greater than 1%.

When You Should Not Contribute to your TFSA

November 20, 2017

I have noticed that many of my clients do not contribute to their TFSA or do not maximize their contribution. If you do not have the money then that is a good reason. If you do and you’re still not doing it, then the following are the only reasons that justify NOT contributing at this time.

1.  If you are fearful of risk and would only consider a GIC or similar investment then you would be better to pay down a mortgage if the tax-free rate of return (ROR) is less than the interest cost of the mortgage debt or any other higher interest debt.
2.  If you have carry-forward room in your RRSP and do not maximize your contribution, you would be better served to get the tax deduction from contributing to the RRSP.
3.  You have an RESP for your children and you do not maximize the contribution of $2500 per child per year and any previous year that you did not contribute, to obtain the 20% free grant of $500 per child.
4. You are part of an employee share purchase plan or contributory RRSP savings plan and the company is matching your contributions, and you have not maximized your allowable contribution.

If none of these apply to your circumstances then call me to open up your TFSA or to set up regular contributions so that you do not squander this wonderful wealth building tool.

As a reminder, if you are receiving any pension income, your returns from the TFSA will have no effect on your amounts received from CPP or OAS or individual pension plans.

Call me directly if you would like to learn a simple trick that I can show you that may create a tax savings that can be used to feed your TFSA. But hurry and do so as the trick I can show you needs to be completed and sent off to your employer before the end of December. Call me at 613-491-3344 or Toll-Free at 1-866-860-4190.

Sincerely,

John S. Bruce
Senior Investment Advisor
Private Client Division
Direct Line- 613-491-3344
Fax- 613-491-2292
Toll Free- 866-860-4190
Email- jbruce@mackieresearch.com 

https://www.creatingwealth.ca

http://www.mackieresearch.com

Assistant – Brian Donegan
Direct Line – 416-860-7787
Toll Free – 1-844-860-7787
Fax – 416-860-7671
Email – bdonegan@mackieresearch.com

The information in this letter is solely the opinion of the writer and does not reflect the opinions of Mackie Research Capital. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

October 2017 Update

October 20, 2017

It’s been a good run for the U.S. stock markets. The S&P Index is up 11%, the NASDAQ is up 19% and the Dow Jones Industrial Average is up 14% since January, hitting new record highs daily. The advancement has been almost a straight line, with stock price volatility the lowest it has ever been.

I have seen this happen many times during the past 30 years, and eventually something comes along that knocks the wind out of the sails and then we see it crumple and collapse, leaving us wondering how it could happen so fast. In my business there is an expression that states, “Bulls get fed, bears get fed but pigs get slaughtered.” This bull is well fed and it is time to keep our profits out of harm’s way.

I don’t believe that the stock market is a bubble ready to burst. Bubbles are created by speculation, when investors buy a stock simply because its price has risen strongly in the recent past, and buy in, fearing that they will miss the run up.

I am not worried about the broader economy failing and earnings slumping leading to a selloff in all the markets. Every recession that we have seen followed a big downturn in the market.

The U.S. economy is in good shape. Companies have lowered debt and profits have increased in a broad range of industries.  The global economy is back on track and the U.S. dollar came down in value in from its recent highs in relationship to foreign currencies.

The stock market is overvalued. I am concerned about this despite the projections by the talking heads I listen to on business television. That is, stock prices are much too high despite the good outlook for corporate earnings. The only other time in the past 50 years that equity prices have been so highly priced was during the tech bubble. They are actually even more overpriced now than prior to the 1987 market crash.

Minimum wage is rising everywhere you look in  U.S. and Canada. This will result in a squeeze on corporate profits and slower growth for many companies as they pay existing employees more to keep them.  It may create an even more expensive hiring cost to increase employee head counts. Businesses will respond by raising prices more quickly, but they won’t be able to pass on all of their higher costs to customers. Margins will come under pressure.

Intensifying wage and price pressures means that the Governments will need to raise short-term interest rates and in time, longer-term rates to keep the economy from overheating. Higher rates will also attract fixed income investors like the growing ranks of seniors that are now retiring and  baby boomers.  They may very well sell high flying stocks to move to more safe bonds now that rates are starting to move higher and that would contribute to a flat or declining stock market.

No one can tell with total accuracy when or how bad a decline will be, but to operate in a euphoric state and ignore the possibility is a folly. It is not a matter of if it happens; it is a matter of when.

So what do we do?

We prepare! With our more liquid stocks that trade in high volumes daily we can effectively place orders to sell automatically if the price declines to a level or point that we decide is our “safe exit price”. Provided that there is not an enormous amount of selling going on, we should be able to get out close to-if not at-the price we want. For less liquid stocks we might wish to consider selling some now and keeping our powder dry, so to speak, for when prices come down we are prepared to move in and buy some bargains.

With our mutual funds, if you are on a systematic purchase plan for the longer run, this will work well for you. When prices come down you will be buying more of the funds that you want at a lower cost than when they were higher. If you are not contributing regularly to invest, you need to ask yourself why? You pay so many bills on time and regularly, why are you not including your retirement funding as a bill too? Call myself or my assistant Brian to set this up if you have not already done so. Don’t procrastinate, just do it.

Regardless, if the market as a whole is over heated, there is always some company that is doing better than others, has a better future, and is attracting attention. We will still seek out value and invest. When the market goes down it is like a tide that takes all ships. It takes the good and the bad. So be prepared, don’t be surprised. This is the stock market and we have seen it time after time.

The great news here is that one thing is truthful regarding the ups and downs of the equity markets…they always recover. and they always go higher in time. The key is to make the most of these moves and prosper over the long-term.

If you have any questions, call me directly at 613-491-3344 or toll free at 866-860-4190.

Hopefully you are enjoying this beautiful fall and I wish you continued prosperity.
Sincerely,
John S. Bruce
Senior 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.

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.

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