October 5, 2016 Newsletter

Dear Friends,

Tangents:
On this day in…
On October 5, 1947, in the first televised White House address, President Truman asked Americans to refrain from eating meat on Tuesdays and poultry on Thursdays to help stockpile grain for starving people in Europe.
On this day in 2011, Apple founder Steve Jobs dies at age 56.

And it is Bonnie’s 25^th wedding anniversary!
PHOTOS OF THE DAY

A girl rides a swing set up as part of festivities for Dashain as others await their turn in Kathmandu, Nepal, on Wednesday, Oct. 5, 2016. Dashain, the most important religious festival of Nepal’s Hindus, commemorates the victory of the gods over demons. Niranjan Shrestha/AP

People enjoy warm weather on the beach near a memorial for the victims of the July 14 attack on the Promenade des Anglais in Nice, France, on Wednesday. Eric Gaillard/Reuters

Stewards and stewardesses stand in line during the inauguration of the new train line linking Addis Ababa to the Red Sea state of Djibouti, in Addis Ababa, Ethiopia, on Wednesday. Tiksa Negeri/Reuters
Market Closes for October 5^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks rose for the first time in four days driven by miners and energy producers as crude advanced to near $50 a barrel and the recent plunge in gold prices leveled off.
     The S&P/TSX Composite Index rose 0.6 percent to 14,610.58 at 4 p.m. in Toronto, recovering from a three-day slide that wiped out 1.6 percent of its value. The index is up 12 percent this year, making it the third-best performing developed market equity index in the world just behind New Zealand and the U.K.
     Canadian exports rose 0.6 percent in August, their third straight monthly gain. And the nation posted a smaller-than- expected trade deficit.
     Gold was essentially flat at around $1,270 an ounce in New York, after falling more than 3 percent on Tuesday, as the Federal Reserve appears on track to raise interest rates in December. Oil rose 2.3 percent to settle at $49.73 a barrel in New York.
     Canadian stock valuations remain 15 percent higher than their U.S. peers, with the S&P/TSX carrying a price-to-earnings ratio of 23.3 compared with 20.3 for the the S&P 500 Index, according to data compiled by Bloomberg.
     Barrick Gold Corp., the world’s largest gold producer, added 3.4 percent after plunging the most in more than a year Tuesday. Raw-materials producers rose 0.8 percent following the worst one-day slide in three years. The gauge retreated 9.8 percent over the preceding four days.
     Energy producers jumped 1.4 percent, the biggest gain among seven of 11 industries in the S&P/TSX, led by Suncor Energy Inc. and Canadian Natural Resources Ltd.
     Raw-materials and energy producers remain the top- performing industries in Canada this year, fueling a rebound in the wider gauge even as a resurgent first half has sputtered somewhat in the second. The S&P/TSX Materials Index is up 37 percent and set to halt its longest yearly losing streak since 1988. Energy producers are second with a 25 percent gain.
     First National Financial Corp. slumped 9.9 percent for a third day of losses. The alternative lender has plunged 19 percent during its current slide, after Finance Minister Bill Morneau introduced measures this week to cool housing markets in Toronto and Vancouver and curb the rise in household debt. Mortgage insurer Genworth MI Canada Inc. lost 3.2 percent, falling to the lowest close since March.

US
By Anna-Louise Jackson
     (Bloomberg) — Once again, it’s all about the economy.
     That’s what investors in the U.S. stock market are thinking as the Federal Reserve moves closer to raising interest rates and new data show the world’s largest economy strengthening. The S&P 500 Index snapped a two-day drop after reports showing acceleration in the manufacturing and services sectors. While the gauges bolstered the case for higher rates, rallies in homebuilders, truckers and banks overshadowed the angst equity investors normally associate with a looming tightening of monetary policy.
     The readings follow recent assurances from Federal Reserve officials that the U.S. is on firmer footing, and a jobs report Friday could cement the central bank’s position that the economy is sound enough to withstand higher rates. Today’s reports provide relief to investors looking for signs that economic gains will help end five straight quarters of contraction in corporate earnings, said John Augustine, chief investment officer for Huntington Trust in Columbus, Ohio, which oversees more than $17 billion.
     “That could give the central bank some freedom to potentially remove some accommodation moving into next year,” he said. “Central banks are the source of volatility right now, and we suspect they’re going to continue to be the source of volatility in the fourth quarter.”
     The S&P 500 rose 0.4 percent to 2,159.73 at 4 p.m. in New York, rebounding from a drop Tuesday sparked by concerns tighter monetary policy from Europe to the U.S. could derail economic growth. Odds of the Fed raising rates by December climbed to 63 percent, boosting bank shares that benefit from a steeper yield curve. The Dow Jones Transportation Average of truckers and railroad operators posted its highest close this year. Energy producers jumped as crude approached $50 a barrel.
     Figures Wednesday showed factory and durable-goods orders accelerated modestly in August and followed a report on Monday that the Institute for Supply Management’s index — known as the PMI — advanced to 51.5 from August’s contraction-level 49.4 reading. The readings came after data showed car sales were stronger than analysts had estimated in September, suggesting there’s still some steam left in the U.S. auto industry’s six- year growth spurt.
     Nascent improvements in manufacturing help allay concerns about a broader slowdown that would stanch any hope that the recession in corporate earnings will end this year. Rising crude prices have also fed speculation that capital spending in the energy industry will accelerate, benefiting a swath of domestic industries.
     Today’s data are also a reminder what a difference a year can make. Last October, investors were fretting about a contraction in manufacturing that might spill over into a broader economic slowdown. Those fears were stoked in part by Daniel Florness, Fastenal Inc.’s now-chief executive officer, who said at the time that the industrial segment was in a recession. The concerns weren’t wholly unwarranted — the PMI measure of manufacturing activity slumped to 48 in the December reading, which was the lowest since the financial crisis.
     “We’re on firmer footing, but by no means are we seeing a meaningful or durable acceleration in manufacturing,” said Katie Nixon, chief investment officer of wealth management at Northern Trust Corp. “Thank heavens we got the PMI above 50, so we’re not contracting.”
     Crude rose Wednesday to the highest since June after government data showed U.S. stockpiles dropped last week, sending oil and gas companies to an almost four-week high. ConocoPhillips climbed 2.4 percent and Transocean Ltd. added 5.9 percent. Investors continued to unload defensive shares, with phone companies tumbling to the lowest since May, while utilities extended their losing streak to the longest in 14 years.
     U.S. shares overcame anxiety abroad as European stocks slid amid concern that the European Central Bank is moving toward a less accommodative stance. Fed policy makers continued to steer investor expectations toward a December rate increase, with a host of officials calling for tightening as the economy continues to improve. The Dow Jones Industrial Average gained 112.58 points, or 0.6 percent, to 18,281.03. About 7 billion shares traded hands on U.S. exchanges, 6 percent more than the three-month average.
     “The Fed has little excuse to not hike,” said Brian Jacobsen, chief portfolio strategist with Wells Fargo Funds Management LLC, which oversees $242 billion. “The big excuse is on the inflation front and even there, incremental progress is being made.”
     Stocks bounced from a rocky start to the month, as the S&P 500 slipped 0.8 percent over the first two sessions. While the gauge has historically been more volatile in October, it’s a month in which it posted larger gains in the last 25 years, with an average advance of 1.9 percent. The measure closed Wednesday 1.4 percent below the record it reached in August, bringing its annual gain to 5.7 percent.

Have a wonderful weekend everyone.

Be magnificent!

At our first meeting with beauty, we see it in its gaudy faded finery, jarring us with its garish tones,
its frills and flounces, even its deformed shapes.  But when we get to know it better,
the apparent discord reveals itself to us as rhythmic modulations.
At first, we isolate beauty from all that is around it; we detach it from the rest;
but in the end, we understand its harmony with the whole.
Rabindranath Tagore

As ever,

Carolann

The best thing about the future is that it comes one day at a time.
                                                -Abraham Lincoln, 1809-1865

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