August 19, 2015 Newsletter

Dear Friends,

Tangents:

On this day in 1964, The Beatles kicked off their first American tour at San Francisco’s Cow Palace.

1871: Orville Wright, aviator, was born.
1946: Bill Clinton, 42^nd president was born.

The saying, “Getting there is half the fun” became obsolete with the advent of commercial airlines. –Henry Tillman.

Numbers:
30
The number of text messages sent or received by the average US teen on a typical day. (Pew Research Ctr.)
25
Average monthly disposable income (in US dollars) in Cuba, after taxes.  More than 2,000 Cubans have registered their homes for short-term tourist stays through the online service Airbnb, charging multiples of that amount.
17000
Fewer children die each day than in 1990.  In 2013, the mortality rate for children under 5 years of age in all developing countries was cut in half (from 99 deaths per 1,000 births in 1990).  Still, current trends suggest developing countries will short of the United Nations Millennium Development Goal of reducing under-5 mortality by two-thirds by the end of 2015. (World Bank)

PHOTOS OF THE DAY

The Stad Amsterdam clipper ship sails during the Sail-In Parade Wednesday marking the beginning of Sail Amsterdam 2015, a nautical festival held every five years in the Netherlands. Toussaint Kluiters/United Photos/Reuters

Children sign their name and draw on a giant board during the Vacation for Everyone event at the Eiffel Tower in Paris Wednesday. The French charity Secours Populaire brought children from dozens of different countries, including those living through war, poverty or natural disasters, to join French kids for a day of summer fun, allowing even those with limited means to take a vacation at the height of the French holiday season. Francois Mori/AP

Market Closes for August 19^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — The rout in Canadian energy producers worsened amid concern the global supply glut will persist, sending the nation’s benchmark stock index to a third day of losses.

     Energy stocks tumbled to an April 2009 low and a seventh day of losses as an unexpected increase in U.S. crude stockpiles sent oil prices deeper into a bear market. West Texas Intermediate in New York tumbled 4.3 percent to the lowest level in more than six years.

     Stocks also fell amid increasing anxiety over deteriorating overseas markets. The selloff gripping emerging markets isn’t letting up as stocks drop to four-year lows and countries including Vietnam and Kazakhstan weaken their currencies to adjust to the fallout from China’s devaluation.

     The Standard & Poor’s/TSX Composite Index fell 157.24 points, or 1.1 percent, to 14,036.63 at 4 p.m. in Toronto, the biggest decline since July 27. The benchmark Canadian equity gauge has fallen 4.1 percent this year.

     Crescent Point Energy Corp. fell 6.7 percent and Baytex Energy Corp. sank 17 percent as energy stocks retreated 3.5 percent as a group, the most since January. Oil plunged as the Energy Information Administration said U.S. crude supplies rose 2.62 million barrels last week. An 820,000 barrel stockpile decline was projected by analysts surveyed by Bloomberg.

     Commodities producers are the worst-performing industries in the S&P/TSX this year with energy producers pacing declines with an 18 percent drop. Crude has slumped more than 30 percent from this year’s June peak and metals from copper to gold have declined amid concern global growth is slowing.

     Bombardier Inc. lost 2.5 percent, extending a 1991 low. The struggling aerospace manufacturer has slumped for five sessions and is the second-worst performing stock in the S&P/TSX this year with a 71 percent slide.

US

By Callie Bost and Oliver Renick

     (Bloomberg) — A midafternoon rally in U.S. stocks faded as encouragement from Federal Reserve minutes proved fleeting and investors refocused on China and the global economy.

     Stocks briefly trimmed losses as Fed minutes showed policy makers judged conditions for higher rates haven’t been met yet. While that reduced speculation the central bank will raise rates at its next gathering, China’s shock devaluation continued to roil emerging-market assets and threatened to slow global growth amid a rout in commodities.

     “No matter what you’re going to get a knee-jerk reaction,” Steve Bombardiere, an equity trader at Conifer Securities LLC in New York, said by phone. “Trading is so thin it’s easy to push things around but there is some nervousness now with commodities getting weaker and China seeming like it’s losing a little control.”

     The Standard & Poor’s 500 Index fell 0.8 percent to 2,079.61 at 4 p.m. in New York, hovering above its average price for the past 200 days. The gauge nearly erased all of its losses after the minutes were released, before it resumed a slide. The Dow Jones Industrial Average lost 162.61 points, or 0.9 percent, to 17,348.73.

     Caterpillar Inc. and Freeport-McMoRan Inc. paced declines as raw-material and industrial shares slumped more than 1 percent as a group. Energy shares tumbled the most since January as an unexpected increase in U.S. crude stockpiles sent oil prices deeper into a bear market.

     Investor anxiety over deteriorating overseas markets is returning to American equities after a week of relative calm. The selloff gripping emerging markets isn’t letting up as stocks drop to four-year lows and countries including Vietnam and Kazakhstan weaken their currencies to adjust to the fallout from China’s devaluation. Meanwhile, oil has tumbled more than 30 percent since this year’s peak amid signs that producers are maintaining output despite surpluses.

     U.S. stocks slumped with global equities, as the MSCI All- Country World Index dropped 0.9 percent and the Stoxx Europe 600 Index tumbled 1.8 percent. The Chicago Board Options Exchange Volatility Index, known as the VIX, rose 11 percent to 15.25 for its third day of gains.

     Concerns about global growth are increasing as the Fed considers the timing of its first interest rate increase since 2006. Officials said last month that while conditions for raising interest rates were approaching, they saw more room for labor market healing and need more confidence that inflation is moving toward their goal, according to Fed minutes released Wednesday.

     “Almost all voters needed more evidence on inflation,” said Anthony Valeri, a market strategist with LPL Financial Corp. in San Diego. “Since the meeting, inflation expectations have declined, the dollar has increased further and China has devalued its currency. All of those would argue inflation is less of a risk now than it was at the time of the meeting. That would argue against a Fed rate hike.”

     The Fed gathering preceded China’s surprise devaluation on Aug. 11 that prompted some investors to scale back bets on a rate increase in September. Those odds were reduced further on Wednesday, with traders pricing in a 36 percent probability of a rate move next month.

     Data earlier in the day showed the cost of living in the U.S. rose in July at the slowest pace in three months, casting doubt on how quickly inflation will return toward the Fed’s goal.

     Oil’s plunge will probably hold down inflation in the coming months. When combined with a stronger dollar and slower growth overseas, the energy slump will make the Fed’s 2 percent inflation target even more elusive.                         

     The benchmark measure is stuck in the tightest trading range since 1927. Some momentum trades that worked well for investors earlier this year are showing signs of unraveling. A Citigroup Inc. index that tracks U.S. momentum stocks like Apple Inc. and Netflix Inc. fell last week.

     Despite the gloom, some fund managers aren’t shying away from U.S. stocks, citing confidence in the economy and the American consumer. The S&P 500 is still up 1 percent for 2015, and is less than 2.5 percent away from a record reached in May.

     Eight of 10 major groups in the S&P 500 dropped on Wednesday. Energy shares slid 2.8 percent as data showed U.S. crude inventories rose 2.62 million barrels last week, according to the Energy Information Administration. Analysts projected a 820,000 barrel decline in stockpiles.

     Target Corp. rose 0.7 percent, paring an earlier rally of 5.4 percent. While second-quarter earnings beat estimates, the retailer said on a conference call that it’s having difficulties with items being out of stock.

     As the earnings season winds down, about 74 percent of the S&P 500 members that have reported so far beat profit estimates, while 48 percent topped sales projections.

     Yum! Brands Inc. rose 2.2 percent after saying Mickey Pant will succeed Sam Su as chief executive officer of its China unit.
 

Have a wonderful evening everyone.

Be magnificent!

Truth resides in the heart of every man.

And it is there that he must seek it, in order to be guided by it so that,

at the least, it will appear to him.

But we do not have the right to force others to see the Truth in our way.

Mahatma Gandhi

As ever,

Carolann

Procrastination is the thief of time.

         -Edward Young, 1683-1765

Carolann Steinhoff, B.Sc., CFP®, CIM, CIWM

Portfolio Manager &

Senior Vice-President

Queensbury Securities Inc.,

St. Andrew’s Square,

Suite 340A, 730 View St.,

Victoria, B.C. V8W 3Y7