June 8, 2016 Newsletter

Dear Friends,

Tangents:

JUNE:

That wonderful garden raconteur, Canon Ellacombe, always full of sound advice and country common sense, must have been enjoying a good lunch with a bowl of scented roses on his dining-table on the day in June 1871 when he wrote:  “Is there any other month in the year that can show such a delightful triplet as we have now – roses, strawberries and green peas?”  We all have our own June specialty without which we would feel something was missing.  My broad beans have been in advance of the peas this year and thanks to the Mediterranean weather the early potatoes and strawberries were a treat before May was out.  As for roses, the first sweetly-scented blooms have been Souvenir de la Malmaison and Zéphirine Drouhin.  This is the season when it is most difficult to go away even for a night – there is so much to be done at home.  But when we do manage to get away there are always rewards.  Driving from home through to the eastern counties in late May it seemed as though England was a land of white lilacs and pink and white May trees; every front garden and hedgerow were heavy with blossom.  The fields of oil-seed rape glowed like brightest sunshine.  At home I wake to the cuckoo, the milking machine or a particularly noisy aeroplane which sounds as though it is coming right into the house most mornings at 4 a.m.  When we were staying in Dorset I thought I was dreaming when peacocks calling to each other disturbed my sleep.  I remembered Ruskin’s thought “that the most beautiful things in the world are the most useless; peacocks and lilies for instant.”  I don’t necessarily agree with the sentiment but so far have managed to stand out against the introduction to our garden – they may be beautiful but are also destructive.  Lilies are a different matter. –from A COUNTRYWOMAN’S NOTES, Rosemary Verey.

PHOTOS OF THE DAY

Sean D. Tucker flies in the two-seat Oracle Extra airplane over downtown Chicago on Wednesday. Tucker will perform before the start of of the America’s Cup World Series sailing race on Saturday and Sunday. Kiichiro Sato/AP

Emergency workers look at a large sinkhole in Ottawa, Ontario, Canada, on Wednesday. Chris Wattie/Reuters

Market Closes for June 8^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Tweet of the Day

The Bank of England was founded 322 years ago. Its benchmark debt has never yielded as little as on June 7, 2016.
— Dennis K. Berman @dkberman

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell, after a four-day advance that propelled the S&P/TSX Composite Index into a bull market, as falling health-care and energy companies overshadowed gains in raw-material producers.

     The S&P/TSX fell 0.4 percent to 14,313.10 at 4 p.m. in Toronto, reversing an earlier gain of as much as 0.6 percent, briefly eclipsing New Zealand as the world’s top-performing developed equity market this year. The index is up 21 percent from its Jan. 20 low, trading near the highest level in 10 months after climbing out of a bear market on Friday. Trading volume today was about 16 percent higher than the 30-day average.

     “When you look at the fundamentals, there are very few screaming opportunities so you get tweaks,” said Kevin Headland, senior investment strategist at Manulife Investments in Toronto. Manulife’s asset management unit manages about $325 billion. “The rally year-to-date has been all commodities. For Canada, I don’t think we’ll double returns from here but if we see some positive news out of oil prices, there might be more room to run.”

     Canadian equities are neck-and-neck with New Zealand’s S&P/NZX 50 Index as the top performers in 2016 among 24 developed nations with about a 10 percent advance each. This is a stark contrast to 2015 when the S&P/TSX tumbled by 11 percent as one of the world’s worst equity markets. Raw-materials producers have boosted the broader rally this year, soaring 46 percent for the best year-to-date performance in three decades.

     Commodities prices returned to a bull market this week, ending a five-year rout. Raw-material prices and resource-rich emerging markets broadly benefit when the dollar weakens, with prices denominated in the currency. The Bloomberg Dollar Index is trading at the lowest level in a month after May U.S. jobs data disappointed and Federal Reserve Chair Janet Yellen’s recent comments suggest a rate increase this summer is less likely.

     The recent rally has magnified Canadian shares’ more expensive valuation relative to their U.S. peers. The S&P/TSX now trades at 21.9 times earnings, about 12 percent higher than the 19.6 times valuation of the S&P 500 Index.

     Valeant Pharmaceuticals International Inc. dropped a fifth day and was the biggest drag on Canadian health-care stocks. The embattled drugmaker slashed earnings and revenue forecasts Tuesday after posting delayed first-quarter earnings short of analysts’ estimates.

     Concordia Healthcare Corp. lost 3.5 percent. The stock has plunged more than 23 percent over five days after potential acquirers Blackstone Group and Carlyle Group walked away from the drugmaker, according to people familiar with the matter. The company said June 2 it is continuing to pursue strategic alternatives.

     Suncor Energy Inc. dropped 2.8 percent for the steepest drop in a month. The Calgary-based oil-sands producer said it would sell about C$2.5 billion ($2 billion) in shares to cut debt and help fund acquisitions.

     The S&P/TSX Energy Index fell today, even as crude extended gains to settle above $51 a barrel in New York. Industry data showed U.S. crude supplies declined, reducing a glut.

     Raw-materials producers jumped 1.4 percent. Barrick Gold Corp. and Kinross Gold Corp. climbed more than 1.5 percent. Gold rose, pushing its advance for the year to 19 percent in the best start since 1979 as the dollar weakened, while silver reached the highest level since May 17.

US

By Anna-Louise Jackson

     (Bloomberg) — U.S. stocks climbed, with the S&P 500 Index edging closer to a record, bolstered by speculation borrowing costs will remain lower for longer amid moderate growth.

     Companies that benefit from a sagging dollar were the strongest performers, with raw-material and industrial companies leading gains. Caterpillar Inc. increased 1.7 percent, extending its longest winning streak in two months, and copper miner Freeport-McMoRan Inc. added 3 percent. Energy producers erased an early rally, even as oil climbed to a 10-month high.

     The S&P 500 rose 0.3 percent to 2,119.12 at 4 p.m. in New York, the highest since July 21, 2015 and 0.6 percent from a record. The Dow Jones Industrial Average added 66.77 points, or 0.4 percent, to 18,005.05, a six-week high. The Nasdaq Composite Index increased 0.3 percent. About 6.5 billion shares traded hands on U.S. exchanges, 8 percent below the three-month average.

     “No matter what you throw at this market, it keeps wanting to go higher,” said Walter Todd, who oversees about $1.1 billion as chief investment officer for Greenwood Capital Associates LLC in South Carolina. “Sentiment, as has been well documented, is pretty bad and the market tends to inflict the most pain on the most people. And the most people it seems are underweight the market or out of the market.”

     Federal Reserve Chair Janet Yellen’s remarks this week that the U.S. economy is making progress and indications that policy makers won’t prematurely raise interest rates have helped support stocks. Traders have cut back their bets for a Fed rate increase, now pricing in no chance of a boost in June, with the probability for July down to 18 percent from 53 percent a week ago.

     Energy producers in the benchmark index slipped from the highest level since November, after their strongest back-to-back gains in three months. Advances in commodity-related shares have helped drive the S&P 500’s 16 percent rebound from a 22-month low in February as crude recovered from a 12-year nadir. Raw- material companies climbed for a sixth day, the longest since October, as a gauge on the dollar extended declines to a one- month low.

     The rally has been reinvigorated after losing momentum following the S&P 500’s four-month high on April 20. The index has climbed in eight of 11 sessions, racking up nearly all of this year’s 3.7 percent gain in the last two weeks. About 70 percent of stocks on the New York Stock Exchange closed Tuesday above their average prices during the past 200 days, the most since July 2014.                      

     Meanwhile, the main U.S. equity benchmark’s recent climb has been grinding, with the S&P 500 moving no more than 0.5 percent in either direction for a ninth straight day, the longest stretch since 2014.

     The weakest monthly job gains since 2010 were a source of hesitation for investors last week, prompting the only setback for equities in the past six sessions. Further indications on the health of the economy are sparse this week, with data on U.S. wholesale inventories and consumer sentiment scheduled for tomorrow and Friday, respectively. A report from China today indicated exports are stabilizing, while the World Bank cut its 2016 global growth forecast.

     In Wednesday’s trading, S&P 500 industrials, raw-materials, utilities and consumer staples shares rose the most. Phone companies fell for the second time in three days, and energy stocks retreated. A Goldman Sachs Group Inc. basket of the most shorted shares in the Russell 3000 Index climbed for the eighth time in nine sessions and headed toward a fourth weekly gain.

     The CBOE Volatility Index rose 0.2 percent to 14.08. The measure of market turbulence known as the VIX was on pace for a second straight weekly climb and a fourth in the last five.

     Railroads were standouts in the industrial group, with Union Pacific Corp. rallying for a fifth day, the longest in eight months, while Norfolk Southern Corp. and CSX Corp. gained more than 2 percent. In remarks at a Deutsche Bank AG conference, CSX’s chief financial officer said he sees a “positive pricing environment,” and strength in the U.S. consumer.                      

     Raw-materials in the benchmark returned to the highest in almost 11 months, after first reaching the level in late April. Steel company Nucor Corp. gained 2.8 percent to an 18-month high, and PPG Industries Inc. increased 3 percent, the best since March 1.

     Health-care companies rebounded, led by UnitedHealth Group Inc.’s 2.5 percent rally, its strongest since April 20. The shares climbed to a record after the company raised its dividend by 25 percent. Centene Corp. and Cigna Corp. rose more than 1.7 percent, while hospital operator HCA Holdings Inc. advanced 2.2 percent.

     Valero Energy Corp. and Devon Energy Corp. fell at least 2.2 percent to weigh on energy shares. The group wiped out an early 1 percent rally, despite West Texas Intermediate crude futures rising 1.7 percent to settled above $51 a barrel. The sector also produced the S&P 500’s best and worst performers today, with Chesapeake Energy Corp. rising 6.4 percent and Southwestern Energy Co. sliding 7.2 percent.

     “There’s definitely reason for the market to take a breather in conjunction with the notion that we’re near all-time highs,” said Frank Cappelleri, executive director at Instinet LLC. “Treading water at these levels to be honest would be pretty constructive.”

Have a wonderful evening everyone.

Be magnificent!

It is this desire to express himself that leads him to search for riches and power.

But he must understand that to accumulate material wealth is not to find this fulfillment.

What brings him back to himself is the interior light, and not exterior objects.

Rabindranath Tagore

As ever,

Carolann

There is just one life for each of us: our own.

                        -Euripides, 480 BC-406 BC

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