July 12, 2016 Newsletter

Dear Friends,

Tangents:

On this day in 100 B.C., Julius Caesar is born in Rome.

On July 12, 1984, Democratic presidential candidate Walter F. Mondale named New York Congresswoman Geraldine A. Ferraro his running mate, making her the first woman to run on a major party ticket.

1759 – Battle for Quebec Begins as Wolfe’s Artillery Starts Siege.

1812 – General William Hull crosses Detroit River with 2,500 troops, occupies Sandwich; first American invasion in War of 1812.

1968 – Health Minister Allan MacEachen tables Medical Care Act in the Commons.

PHOTOS OF THE DAY

The balloon of Russian adventurer Fedor Konyukhov is seen after it lifted off from Perth, Australia on Tuesday. Konyukhov is attempting to break the world record for a solo hot-air balloon flight around the globe. Oscar Konyukhov/Reuters

A police car passes, telling people to leave the street as the sun sets over Manhattan aligned exactly with the street grid in a phenomenon known as “Manhattanhenge”, in New York City, on Monday evening. Mark Kauzlarich/Reuters

Market Closes for July 12^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Bailey Lipschultz

     (Bloomberg) — Canadian stocks rose to the highest in 11 months, led by energy producers as crude surged amid prospects for more stimulus in major economies.

     The S&P/TSX Composite Index rose 0.8 percent to 14,477.67 at 4 p.m. in Toronto for a third consecutive rally, with nine of 10 main industries gaining. Trading volume for shares in the benchmark was 8 percent higher than the 30-day average.

     Global equities advanced for a fourth session after Japanese Prime Minister Shinzo Abe vowed to speed up efforts to defeat deflation, while a majority of economists expect the Bank of England to cut interest rates this week and traders are betting there will be further monetary easing in the euro area this year.

     Energy companies in Canada climbed 2.2 percent to the highest in a year, with MEG Energy Corp. and Ensign Energy Services Inc. each rising at least 6.4 percent. West Texas Intermediate crude futures in New York gained 4.6 percent, its best since April.

     Industrial shares advanced 1.4 percent to the highest since August. Bombardier Inc. increased 3.4 percent to its highest in a year, after Porter Airlines Inc. confirmed a $93 million order for three Bombardier Q400s. WestJet Airlines Ltd. provided the biggest move for the group, gaining 5 percent.

     Colliers International Group Inc. and Home Capital Group Inc. increased at least 3.8 percent to lead the nation’s financial sector higher. The sector extended a rally to three sessions, its best increase for that duration since April. Genworth MI Canada Inc. rose 3 percent, the most in four months.

     Northland Power Inc. surged 6.7 percent, the most since October 2008, to a record after the renewable energy producer said it hired bankers to undertake a strategic review to focus on enhancing growth, shareholder value and the ability to capitalize on opportunities in clean energy infrastructure.

     Raw-materials were the industry to retreat, falling 2.5 percent, as gold dropped. Endeavour Mining Corp. fell 9.4 percent after announcing a board change. SEMAFO Inc. and Barrick Gold Corp. lost at least 6.6 percent.

US

By Joseph Ciolli

     (Bloomberg) — The Dow Jones Industrial Average joined the S&P 500 Index to close at a fresh record, with U.S. equities climbing a third day as crude rallied and Alcoa Inc.’s results bolstered optimism on corporate health amid the start of the earnings season.

     Alcoa jumped to a two-month high after the aluminum producer posted a profit that beat analysts’ estimates, kicking off the quarterly reporting period. BlackRock Inc., JPMorgan Chase & Co. and Citigroup Inc. are among firms releasing results this week.

     Commodity producers and and transportation stocks posted some of the biggest gains today, with American Airlines Inc. rallying 11 percent for its best day since at least December 2013. Oil and gas companies climbed to the highest since November as crude had its steepest gain in three months. Miner Freeport-McMoRan Inc. also increased 11 percent.

     The S&P 500 added 0.7 percent to 2,152.14 at 4 p.m. in New York, extending its all-time high after surpassing yesterday the previous record reached in May 2015 on bets of a brighter economic outlook after Friday’s jobs report. The Dow rose 120.74 points, or 0.7 percent, to 18,347.67 today. The index briefly eclipsed the intraday record it set last year. The Nasdaq Composite Index climbed 0.7 percent to the highest since Dec. 30.

     “People are coming back into stocks because they see central banks coming in very quickly to backstop markets. That’s what we’ve witnessed post-Brexit,” David Zervos, chief market strategist at Jefferies LLC, said in a television interview on Bloomberg Go.

     The S&P 500 climbed above 2,152, the average level at which strategists surveyed by Bloomberg see the equity benchmark ending 2016. It marks the first time since November 2014 that the gauge has caught up to their optimistic forecasts. About 7.6 billion shares traded hands on U.S. exchanges Tuesday, 5 percent above the three-month average.

     Stocks have climbed since Friday, erasing the losses triggered by the U.K.’s vote to leave the European Union, as a stronger-than-forecast payrolls report helped allay investor concerns. At the same time, traders are pricing in little chance of an interest-rate hike from the Federal Reserve anytime soon, with September 2017 being the first month that has even odds of a raise, implying a so-called “Goldilocks” scenario for equities in which the economy expands but at a lukewarm pace to hold off further monetary tightening.

     Meanwhile, investors have also sought the safety of Treasuries in the aftermath of the Brexit vote, sending bond yields to record lows last week. Fresh peaks for stocks coupled with all-time lows for bonds is unusual given that they are generally seen as risk-on/risk-off complements. Demand for U.S. bonds has also ramped up amid sub-zero yields in Europe and Japan.

     The CBOE Volatility Index edged higher for a second day, even as stocks advanced — a sign investors are still exercising caution. The measure of market turbulence known as the VIX added less than 0.1 percent to 13.55. A Goldman Sachs Group Inc. basket of most shorted shares rose for a fifth day, the longest in fourth months. It was the ninth increase in 10 days, with the gauge up 15 percent over the span.

     “I firmly believe in the efficacy of QE — I think it works great magic — but I’m a little concerned that we’ve now taken bonds to record low yields and stocks to record highs at the same time,” Zervos said. “Usually, bonds are supposed to hedge equities. What the Fed is doing is running this very hot, and the traditional outcome of that isn’t so hot.”

     Investors turn their focus to corporate results this week, with analysts projecting a profit decline of 5.7 percent at S&P 500 companies in the second quarter. That would make it the fifth straight quarterly drop, the longest streak since 2009. Bank earnings are forecast to slide 11 percent in the period.

     “We’ve been so overwhelmed with larger macro and political issues for the last couple of cycles that we now have the chance to focus on individual companies and see how they’re doing,” said Peter Jankovskis, who helps oversee $1.9 billion as co- chief investment officer of Lisle, Illinois-based OakBrook Investments. “That could be very positive for the market.”

     A Bloomberg gauge of U.S. airlines soared 6.5 percent for its strongest one-day gain since November 2014, hoisted in part by American Airlines. The carrier said it expects new credit- card deals with Citigroup Inc. and Barclays Plc to boost its pretax income by about $1.55 billion over the next two-and-a- half years. Deutsche Bank AG also recommended buying shares in the three largest airlines. United Continental Holdings Inc. and Delta Air Lines Inc. advanced more than 5.4 percent.

     Seagate Technology Plc surged 22 percent, the steepest since 2011, after saying it will eliminate about 14 percent of its workforce in an effort to reduce costs to weather a prolonged slump in demand.

     R.R. Donnelley & Sons Co. increased 2 percent, paring an earlier 7.5 percent climb, after people with knowledge of the matter said Xerox Corp. is in talks to acquire the Chicago-based printing company. Xerox Corp. added 1.8 percent.

     Fastenal Co. lost 3.5 percent after posting quarterly earnings and sales that missed estimates.

     The S&P 500’s main groups that have posted the biggest gains in 2016 — utility and phone companies — were among the weakest today. The industries, often considered defensive since they pay higher dividends and are less reliant on economic growth, lagged the broader index Tuesday along with consumer- staples companies.

Have a wonderful evening everyone.

Be magnificent!

A state of harmony with nature,

with all beings of creation,

itself leads to our harmony with humans.

If we lose our relationship with nature,

we lose inevitably

our relationship with humans.

Krishnamurti

As ever,

Carolann

You can’t fake listening.  It shows.

           -Raquel Welch,  b. 1940

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