August 15, 2016 Newsletter

Dear Friends,

Tangents:
On August 15^th, 1057, Macbeth was killed at the Battle of Lumphanan in Aberdeenshire by Malcolm lll’s men as he tried to return to Moray.   Macbeth was  born in 1005 and was king of Scotland, Mormaer of Moray from 1040-1057.   He was also a grandson of Malcolm ll.  He married Gruoch, granddaughter of Kenneth ll.  In 1040, he defeated and killed King Duncan and drove Duncan’s sons, Malcolm and Donald Ban  into exile.  He seems to have represented a Celtic reaction against English influence.  Malcolm ll was Duncan’s son (it gets confusing). Macbeth’s body was buried in the holy isle of Iona, where many other Scottish kings were buried.  A few days after his death, his stepson, Lulach, was elected high king.

Out, out, brief candle! Life’s but a walking shadow, a poor player that struts and frets his hour upon the stage and then is heard no more: it is a tale told by an idiot, full of sound and fury, signifying nothing.”(Act V, Scene V)

On Aug. 15, 1947, India and Pakistan became independent after some 200 years of British rule.
PHOTOS OF THE DAY

A triple jumper competes in the men’s qualifying round on Monday. The picture was taken with fisheye lens. Kai Pfaffenbach/Reuters

Swimmers compete during the women’s marathon swimming competition on Monday. Gregory Bull/AP

Cyclists Anna Knauer of Germany and Allison Beveridge of Canada crash during the women’s omnium 10k scratch race on Monday. Paul Hanna/Reuters
Market Closes for August 15^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks rose, closing near the highest level in a year, as energy producers advanced for a third session amid speculation crude prices will continue to rebound and Valeant Pharmaceuticals International Inc. jumped after an analyst upgrade.
     The S&P/TSX Composite Index added 0.2 percent to 14,777.02 at 4 p.m. in Toronto, after earlier gaining as much as 0.4 percent to touch the highest level on a closing basis since June 2015. Trading volume was 20 percent lower than the 30-day average. The S&P/TSX is the second-best performing developed market in the world this year, just behind New Zealand.
     Cenovus Energy Inc. and Crescent Point Energy Corp. added at least 2 percent as oil and gas producers increased 0.8 percent as a group, pacing gains in the S&P/TSX. Six of 10 industries in the Canadian equity benchmark advanced. The S&P/TSX Energy Index has rallied 2 percent in three sessions, to the highest in more than a year.
     Crude futures climbed 2.8 percent to the highest in four weeks, topping $45 a barrel in New York, amid speculation producers will revive talks to stabilize prices. Crude climbed 6.4 percent last week as Saudi Arabia signaled it’s prepared to discuss stabilizing markets at informal OPEC discussions next month. Russia is also reportedly open to talks for a joint output freeze.
     In Canada, the rebound this year continues to be led by mining and materials companies, the top gainers this year among 10 industries in the S&P/TSX with a 63 percent advance, the best year-to-date performance for the category in at least 30 years according to data compiled by Bloomberg.
     That’s boosted the Canadian equity benchmark to a 14 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. The rally has made Canadian stocks more expensive than their U.S. peers, with a price-earnings ratio of 23.6 for the S&P/TSX, about 15 percent higher than the S&P 500 Index.
     Canadian equities are joining a global rally, with a gauge of world developed and developing markets trading at the highest in a year on speculation uneven economic growth will mean more monetary stimulus from the world’s central banks, extending gains after a brief dip following the surprise U.K. Brexit vote in June. The S&P 500 rose in New York, posting a fresh record after capping on Friday a sixth weekly advance in seven.
     Valeant buoyed health-care shares after analysts at Mizuho Securities raised their rating on the stock to neutral from sell. The shares jumped 6.6 percent.
     Struggling drugmaker Concordia International Corp. fell 6 percent, extending losses to a third day after plummeting the most in more than three years on Aug. 12. A smaller peer of Valeant, Concordia slashed its 2016 forecast, suspended its dividend and announced the departure of a key executive amid disappointing second-quarter results.

US
By Oliver Renick
     (Bloomberg) — The U.S. stock market, extending its sixth weekly advance in two months on Monday, is winning converts, slowly but surely.
     With low-volatility stocks falling to the back of the pack as technology, banks and commodity firms lead the S&P 500 Index to all-time highs, U.S. equities are seeing a resurgence in popularity among a few notable constituencies. Asset managers are favoring stocks over U.S. Treasuries, while active equity funds are the most bullish since 2008, according to Bank of America Corp.
     That marks a shift in tone from the start of the year when investors were yanking money from stocks and beefing up their cash piles. The benchmark index claimed another record Monday — along with the Dow Jones Industrial Average and Nasdaq Composite Index — for its 10th all-time high in a little more than a month. The S&P 500 climbed 0.3 percent to 2,190.15 at 4 p.m. in New York, while the Dow increased 59.58 points, or 0.3 percent, to 18,636.05. The Nasdaq added 0.6 percent.
      “Today equities do not look bad on a valuation basis relative to fixed income and that’s what keeps pushing it,” Rick Rieder, chief investment officer of global fixed income at BlackRock Inc., said in an interview Monday on Bloomberg Television. “The technicals in the equity market have been pretty good and the flows have all been into fixed income — you could see even a small part of that reverse which presses equities a bit higher.”
     Asset managers bought $6.7 billion of S&P 500 futures and sold $8.6 billion of Treasuries in the week ending August 9, according to a report by Bank of America analysts led by Jue Xiong. Those investors have been rotating from U.S. bonds and into stocks since the start of the third quarter, Xiong said by phone.
     At the same time, large-cap U.S. money managers are more leveraged to the performance of the S&P 500 than at any time since 2008, a separate analysis by the bank showed. Active investors that follow a long-short strategy are about 56 percent long, the most since July 2015, according to that report.
     U.S. stocks advanced Monday amid deal activity and as crude oil extended gains to lift commodity producers. Optimism that central banks will continue efforts to boost growth coupled with better-than-estimated corporate earnings have helped lift equities in the past month, raising valuations. The S&P 500’s price relative to future earnings has climbed to 18.6, the highest since 2002.
     Post Properties Inc. jumped 9.4 percent to a record after Mid-America Apartment Communities Inc. agreed to buy the company for about $3.9 billion. Xylem Inc., a maker of wastewater and water treatment systems, climbed 3.9 percent after agreeing to acquire Sensus for about $1.7 billion. Raw-materials companies gained 1 percent for the strongest increase in a month. Copper miner Freeport-McMoRan Inc. rose 3 percent. About 5.5 billion shares traded hands on U.S. exchanges, 20 percent below the three-month average.
     “Stocks have retained a hot pitch and there’s a lot of demand for equities,” Andrew Brenner, the head of international fixed income for National Alliance Capital Markets, said by phone. “We’ve been in a monetary easing mode for the ECB, the Bank of Japan, the Bank of England and that’s kind of been driving things. The question is how you make money in a low interest rate environment, and equities might be expensive, but they’re the least dirty shirt.”
     While readings on the labor market have continued to indicate a steady improvement, bolstering confidence in the economy, occasional disappointments such as Friday’s retail report and worse-than-forecast second-quarter growth have stoked speculation the Federal Reserve won’t raise interest rates too quickly.
     Reports today showed manufacturing activity in the New York region unexpectedly contracted this month, while confidence among homebuilders climbed in August as steady job growth and low interest rates boosted prospects for the residential real estate. Builder Toll Brothers Inc. advanced 3.2 percent, the best gain in five weeks.
     More cues are due this week, including data on housing starts and industrial production, while the Fed releases minutes from its July meeting on Wednesday. Traders aren’t convinced the economy will strengthen enough this year to spur a rate increase, with bets on higher borrowing costs not showing at least even odds of a move until March 2017.
     Most S&P 500 companies have released results this reporting season, with 78 percent exceeding profit forecasts and 56 percent beating sales projections. Analysts have tempered their bearishness for second-quarter net income at the gauge’s members, estimating a drop of 2.5 percent, from a slide of 5.8 percent just a month ago. Firms reporting results this week include Home Depot Inc., Cisco Systems Inc. and Target Corp.
     Among shares moving on corporate news, Chesapeake Energy Corp. rose 9.6 percent to a three-month high, as crude rallied and the company said it’s seeking a $1 billion loan in a step to refinance its $9 billion debt load.
–With assistance from Aleksandra Gjorgievska.

Have a wonderful evening everyone.

Be magnificent!

It is only a mind that looks at a tree or the stars or the sparkling waters of a river

with complete abandonment that knows what beauty is,

and when we are actually seeing we are in a state of love.

Krishnamurti

As ever,
 

Carolann

And alien tears will fill for him

Pity’s long-broken urn,

For his mourners will be outcast men,

And outcasts always mourn.

       –Oscar Wilde, 1854-1900

 From The Ballad of Reading Gaol, inscribed on Wilde’s tomb in Pere Lachaise cemetery, Paris.

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