December 15, 2015 Newsletter

Dear Friends,

Tangents:

FALL SONG

  By Joy Harjo

It is a dark fall day.
The earth is slightly damp with rain.
I hear a jay.
The cry is blue.
I have found you in the story again.
Is there another word for “divine”?
I need a song that will keep sky open in my mind.
If I think behind me, I might break.
If I think forward, I lose now.
Forever will be a day like this
Strung perfectly on the necklace of days.
Slightly overcast
Yellow leaves
Your jacket hanging in the hallway
Next to mine.

This Day In History:

On Dec. 15, 1916, the French defeated the Germans in the World War I Battle of Verdun.

1939 – The movie “Gone With the Wind” had its world premiere in Atlanta.

1944 – Bandleader Glenn Miller’s U.S. Army plane disappeared over the English Channel.

1961 – Former Nazi official Adolf Eichmann was sentenced to death by an Israeli court.

1966 – Movie producer Walt Disney died at age 65.

PHOTOS OF THE DAY

A flock of starlings flies in the dusk sky over Rome, Italy on Tuesday. Tony Gentile/Reuters

A dog is reflected in the water of a fountain as it runs by a Ferris wheel on the place Massena as part of Christmas holiday season illuminations in Nice, France, Tuesday. Eric Gaillard/Reuters

Market Closes for December 15^th, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Dani Burger

     (Bloomberg) — Canadian stocks rebounded from a two-year low, joining a rally in global equities as tensions on credit markets eased and oil held onto gains from a six-year low, while Valeant Pharmaceuticals International Inc. rallied the most in a decade.

     The Standard & Poor’s/TSX Composite Index advanced 1.8 percent to 12,919.57 at 4 p.m. in Toronto, the biggest gain in a month. The gauge is still down by 12 percent in this year and on Monday slumped to its lowest level since October 2013.

     Equities rebounded Tuesday as investors piled into risk assets a day before the U.S. Federal Reserve is expected to raise interest rates for the first time since 2006. The loss of stimulus comes amid ongoing concern that slowing growth in China may spread. Worries that the world’s largest consumer of resources has sent for raw materials tumbling, and pushed Canada’s resource-rich equity benchmark to the the third worst returns this year among developed nations.

     Those concerns dissipated, at least for a day, as energy- related companies rose 2.3 percent Tuesday as a selloff in crude halted amid signs that the U.S. may lift an export ban for the first time in 40 years. West Texas Intermediate climbed 2.8 percent, adding to Monday’s 1.9 percent gain.

     While traders are pricing in a 78 percent probability that the Fed will raise rates, almost all economists surveyed by Bloomberg predict that the Bank of Canada will hold interest rates steady next year. It would be a rare break between the major central banks as prices plunge for oil, copper and other commodities that Canada produces.

     Valeant rose 16 percent, its biggest gain since 2005, after agreeing to cut some drug prices in a distribution pact with Walgreens Boots Alliance Inc. The drugmaker, under scrutiny for its drug-pricing practices, will trim prices by 10 percent for branded prescription-based skin and eye products.

     A Canadian index measuring 429 micro-cap companies slid for a seventh consecutive day to a record low. The S&P/TSX Venture Composite Index sank below 500 for the first time yesterday, declining 1.2 percent.

US

By Anna-Louise Jackson

     (Bloomberg) — The Standard & Poor’s 500 Index capped its first back-to-back gains in more than a month as energy companies led a rally with crude oil, while Federal Reserve officials started a two-day meeting at which they’re widely expected to raise interest rates for the first time since 2006.

     Chevron Corp. and Exxon Mobil Corp. gained more than 3.8 percent, taking their two-day advances to at least 6.8 percent. Financial shares increased as concern over turmoil in high-yield bonds abated, with banks rallying the most in seven weeks on the eve of what most believe will be the end of the Fed’s zero interest rate policy. 3M Co. fell 6 percent, weighing on industrials after cutting its profit forecast.

     The S&P 500 climbed 1.1 percent to 2,043.41 at 4 p.m. in New York, marking its first consecutive increases since Nov. 3. The Dow Jones Industrial Average rose 156.41 points, or 0.9 percent, to 17,524.91, even as 3M’s retreat amounted to about 63 points off the index. The Nasdaq Composite Index rallied 0.9 percent. About 8.1 billion shares traded hands on U.S. exchanges, 12 percent above the three-month average.

     “What’s happening today is a realization that we ended up with a sizable rally in oil yesterday,” said Bob Baur, chief global economist at Principal Global Investors, which oversees $333 billion. “I think maybe the market is looking for some stabilization in oil and materials to put a bottom in some of the anxiety that’s hanging around the market.”

     Prospects for the first U.S. rate increase since 2006 and a deepening oil rout had sparked a selloff in riskier assets in December. The S&P 500’s 1.8 percent decline is bucking the historical trend of gains in the final month, with the equity gauge on track for its worst December in 13 years and the biggest annual drop since 2008. It has slipped 4.1 percent since a May record.

     Fed officials announce their rate decision tomorrow at 2 p.m. in Washington, and traders are pricing in a 78 percent chance of a liftoff. Data today reinforced expectations for a gradual increase in rates, with the cost of living holding steady in November, underscoring scant inflation that is well below the Fed’s goal. Among the other few economic cues before the rate announcement are reports on housing starts and industrial production Wednesday.

     “I think the Fed will be comfortable with a rate hike tomorrow,” said Brian Jacobsen, who helps oversee $242 billion as the chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “They’ll certainly want to convincingly signal that they’re going to follow a very shallow path in future rate hikes.”

     While an improving U.S. economy has helped equities recover from a summer selloff and kept the Fed on track to raising borrowing costs, investors remain in a quandary as China’s slowdown threatens to weigh on global growth, a risk which continues to be reflected by weakness in commodity prices. Despite oil’s climb today, the Bloomberg Commodity Index extended further into 16-year lows.

     Amid Tuesday’s rally there were signs of easing bond-market anxiety that had leaked into equities after Third Avenue Management last week froze redemptions at a high-yield mutual fund. The SPDR Barclays High Yield Bond ETF rose 1.2 percent, and the iShares iBoxx $ High Yield Corporate Bond ETF surged 1.6 percent, the most in almost a year.

     Another gauge of investor nervousness, the Chicago Board Options Exchange Volatility Index, fell 7.8 percent Tuesday to 20.95, extending its two-day decline to 14 percent. The measure of market turbulence known as the VIX surged 65 percent last week, the most since a record monthly jump in August.

     All of the S&P 500’s 10 main industries climbed today, led by energy’s 2.9 percent jump. Financial and health-care companies added more than 1.3 percent.

     Ensco Plc rose almost 8 percent to lead the energy group, while Diamond Offshore Drilling Inc. and Transocean Ltd. added at least 4.7 percent. Exxon Mobil had its strongest gain in more than three months. West Texas Intermediate crude futures settled 2.8 percent higher, up for a second day amid signs the U.S. may allow unfettered exports for the first time in 40 years.

     Banks surged, rising along with Treasury yields amid speculation that higher interest rates will lift profits. Comerica Inc. rallied 4.3 percent, while Regions Financial Corp. and Huntington Bancshares Inc. gained at least 3.6 percent. The KBW Bank Index climbed 3.1 percent as it recovered half of its worst weekly drop since August. Among other financial companies, Morgan Stanley and Goldman Sachs Group Inc. increased more than 3 percent.

     Gains among biotechnology companies boosted the health-care group, with the Nasdaq Biotechnology Index jumping 2.8 percent. Illumina Inc. and Endo International Plc added more than 6 percent. Celgene Corp., Amgen Inc. and Biogen Inc. climbed at least 2.3 percent. Pharma giant Johnson & Johnson gained 1.9 percent.

     Walt Disney Co. rose 2.6 percent, the most since Oct. 22. The entertainment company paced gains among consumer discretionary shares just days before “Star Wars: The Force Awakens” opens in theaters nationwide. Disney and Alibaba Group Holding Ltd. also announced a multiyear licensing agreement for a device that will deliver Disney and Pixar movies, games and travel services in China.

     Media companies in the S&P 500 increased, with News Corp. and CBS Corp. advancing at least 1 percent. The group had declined more than 8 percent during the previous three weeks.

     Among other consumer shares, online travel companies Priceline Group Inc., TripAdvisor Inc. and Expedia Inc. all climbed at least 1.9 percent. Ford Motor Co. added 1.8 percent, the most in a month.

     Industrial companies in the benchmark were the day’s smallest gainer, thanks to the drag from 3M’s 6 percent drop. The maker of Post-it Notes and industrial products slid the most since in four years after cutting its 2015 earnings forecast for the second time in as many months, blaming sluggish growth in the world economy.

     Agco Corp. lost 6.8 percent, the most in a year. The world’s third-largest agricultural machinery maker projected lower-than-expected sales and profit for next year. Competitor Deere & Co. slipped 2.1 percent.
 

Have a wonderful evening everyone.

Be magnificent!
 

No one can understand the sound of a drum,

without understanding both the drum and the drummer.

No one can understand the sound of a conch shell,

Without

without understanding both the lute and the one who plays it.

As there can be no water without the sea, no touch without the skin,

no thought without the mind, no work without hands, and no walking without feet,

so there can be nothing without the soul.

Brihadaranyaka Upanishad

As ever,

Carolann

Try to learn something about everything and everything about something.

                                                              –Thomas Huxley, 1825-1895

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