October 19, 2016 Newsletter

Dear Friends,

Tangents:

Today is Sukkoth, the Hebrew name for the Feast of the Tabernacle.  The Tabernacle (from the Latin tabernaculum, meaning tent) refers to the portable shrine instituted by Moses during the wanderings of the Jews in the wilderness.  It was divided by a veil or hanging, behind which, in the Holy of Holies (the innermost apartment of the Jewish temple, in which the Ark of the Covenant was kept and into which only the High Priest was allowed to enter and even then only once a year on the Day of Atonement) was the Ark of the Covenant.  The outer division was called the Holy Place.  When set up in camp, the whole was surrounded by an enclosure (Exodus 25-31, 33:7-10).

I AM
two of the most powerful words.  For what you put after them shapes your reality.
PHOTOS OF THE DAY

A Jewish man uses his mobile phone to record worshippers who are covered in prayer shawls as they recite the priestly blessing at the Western Wall in Jerusalem’s Old City during the Jewish holiday of Sukkot on Wednesday. Baz Ratner/Reuters

Bulldog Rosie sits under the desk of her owner, Barbara Goldberg, CEO of O’Connell & Goldberg Public Relations, at her office in Hollywood, Fla., on Tuesday. Goldberg is a small business owner who believes pets improve the quality of their work life, boosting morale and easing tension for staffers.Lynne Sladky/AP
Market Closes for October 19^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

NUMBER OF THE DAY
$100 million 

The approximate amount that one junk-bond trader at Goldman Sachs earned in trading profits for the bank earlier this year, an unusual gain at a time when new regulations have forced Wall Street to take fewer risks. Goldman reported surprisingly strong earnings Tuesday as revenue surged in the third quarter. 

Canada
By John Hyland and Eric Lam
     (Bloomberg) — Canadian stocks jumped to a 15-month high as the nation’s resource-rich equity index advanced with oil and gold prices. Shares also got a boost from the prospect for additional stimulus as the Bank of Canada dimmed its outlook for the domestic economy.
     The S&P/TSX Composite Index rose 0.6 percent to 14,840.49 at 4 p.m. in Toronto, as a third day of gains pushed its advance in October to 0.8 percent. The Canadian equity benchmark is up 14 percent this year amid rallies in miners and energy producers that make up one-third of the index, making it the top performing developed equity market in the world ahead of the U.K. and New Zealand.
     “You’ve got oil and gold up, that’s really fueling Toronto right now,” said Norman Levine, a fund manager with Portfolio Management Corp. in Toronto. The firm manages about C$550 million and has recently begun positioning its portfolios for a higher interest rate environment and stimulative infrastructure spending in Canada, including adding a position in Edmonton engineering firm Stantec Inc., Levine said.
     Raw-materials and energy producers paced gains Wednesday, jumping at least 1.3 percent as crude prices surged to the highest levels in 15 months. Crude has rallied as OPEC members look set to enact a production cut that would reduce supply. Oil got a boost Wednesday amid a decline in U.S. stockpiles, according to weekly industry data that showed inventories dropped by 3.8 million barrels.
     Raw-materials producers surged as gold advanced to its highest in two weeks. The metal’s appeal improved as the dollar weakened amid speculation the Federal Reserve will gradually tighten monetary policy. Gold had its first back-to-back gains in almost a month on Tuesday. Barrick Gold Corp. soared 7.5 percent for the biggest gain in a month.
     While the Fed considers the timing for higher interest rates, the Bank of Canada maintained its benchmark lending rate and reduced the nation’s growth profile on weakness in exports and new housing rules. Governor Stephen Poloz said the central bank “actively” discussed the possibility of adding more stimulus to jump-start the economy. However, the increased amount of uncertainty stayed his hand.
     While the prospect for more stimulus would underpin Canadian equity gains because lower rates would boost the economy, adding to corporate profits, tighter monetary policy in the U.S. would signal growth there, bolstering prospects for Canada’s exporters Levine said. America is Canada’s largest trading partner.
     “As the U.S. economy improves the Canadian economy will improve,” he said. “You’d be surprised how soon we will raise rates. We will eventually follow what the Fed does because our countries are so tied.”
     Corporate results continue to show a mixed picture for the nation’s largest companies. Canadian Pacific Railway declined 1.87 percent as it reduced its full-year profit target amid a 9 percent revenue decline. Canada’s second-largest railroad has reduced staff and parked locomotives amid falling revenue.
     Canadian stock valuations are 17 percent higher than their U.S. peers, with the S&P/TSX carrying a price-earnings ratio of 23.6 compared with 20.1 for the the S&P 500 Index, according to data compiled by Bloomberg.

US
By Oliver Renick and Rebecca Spalding
     (Bloomberg) — When stock investors and currency traders look out upon the world, they see two very different things.
     In the equity market, things are calm. The S&P 500 Index is alternating between small up-and-down moves day after day, and the benchmark gauge for price turbulence sits 20 percent below its historical average. At the same time in currencies, where volatility came close to doubling in 2014 as the dollar rallied, anxiety is refusing to abate.
     How big is the disparity? Stock angst as measured by the CBOE Volatility Index is sitting near a record low relative to a basket of seven developed-world currencies, according to one measure of options prices. The ratio of three-month implied volatility in the S&P 500 is 1.4 times that of the average currency reading, a lower level than about 88 percent of the time in the last 10 years, data compiled by Bloomberg show.
     The S&P 500 climbed 0.2 percent to 2,144.29 at 4 p.m. Wednesday, capping its first back-to-back gains in two weeks, bolstered by better-than-forecast earnings and a rally in crude oil. The gauge closed above its average price during the past 100 days for the first time in seven sessions.
     The co-head of equities at Cantor Fitzgerald says something has to give.
     “Historically, a basket of currencies in the big markets can be more sensitive to where there is outlying volatility that just looking at equity vol may not make you aware of — so to some extent, volatility in the currency market portends volatility in the equity market,” New York-based Peter Cecchini said in an interview. “As the dollar continues to strengthen that could mean outflows from emerging markets and the catalyst may well be a rate hike in December.”
     Volatility in currency markets, though less than in the aftermath of the U.K.’s Brexit vote, is 79 percent higher than in the middle of 2014, when the U.S. dollar began a 25 percent rally through January of this year.
     Currency swings have come in tandem with some of the biggest selloffs in the U.S. equity market in the past two years. The S&P 500 dipped 5 percent in the two days following Brexit as the pound plunged the most ever, and stocks dropped as much as 10 percent in August 2015 on the heels of a surprise devaluation of the Chinese yuan. 
     While China has steadily weakened the yuan since then, currency swings in 2016 have become more prominent in the pound, yen and the Canadian dollar. Three-month volatility in the pound remains near the highest since the financial crisis and the yen this year has twice touched levels unseen since 2013.
     Still, it’s been all quiet on the equity front. The same gauge of volatility for the S&P 500 is more than 8 percent lower than a month ago and 12 percent below its five-year average. A lack of high-yielding asset classes outside the U.S. stock market and persistently low interest rates set by the Fed may be suppressing volatility in stocks, Cecchini said. The measure of market turmoil known as the VIX fell 5.7 percent Wednesday.
     Energy producers jumped today as crude oil reached a 15- month high, helping to spur broader equity gains. Data showed stockpiles unexpectedly fell, boosting optimism that the drag on profits from oil and gas companies will abate. Banks advanced amid better-than-forecast earnings.
     After regular trading, American Express Co. raised its full-year profit forecast as quarterly results exceeded estimates, sending the shares up 5 percent as of 4:30 p.m. EBay Inc. dropped 8 percent after hours as its fourth-quarter earnings outlook disappointed.
     The Dow Jones Industrial Average climbed 40.68 points, or 0.2 percent, to 18,202.62. The Nasdaq Composite Index rose less than 0.1 percent, muted by Intel Corp.’s disappointing sales outlook which held back technology shares. About 6 billion shares traded hands on U.S. exchanges, 8 percent below the three-month average.
     “We did get a number of earnings so that will continue to be the focus,” said Yousef Abbasi, a global market strategist at JonesTrading Institutional Services LLC. “We could have some momentum behind financials today. It has been a market that has lacked leadership to a certain extent, so we’re looking to financials and energy.”
     Morgan Stanley and Halliburton Co. climbed at least 1.8 percent on better-than-estimated results, while U.S. Bancorp advanced 1.3 percent after posting a profit that beat analysts’ expectations as revenue from loans and fee-based businesses increased. Intel dropped the most in nine months, while cigarette maker Reynolds American Inc. sank to the lowest since January after its profit missed predictions.
     Ahead of the third and final presidential debate, a Bloomberg Politics national poll showed a nine-point lead for Democratic nominee Hillary Clinton over Republican Donald Trump. A Trump could prompt declines in equities, Citigroup Inc. has said.
     Traders are betting it’s unlikely the Federal Reserve will raise rates at its November meeting just days before the vote, while they price in a 63 percent chance of a hike in December, down from 68 percent a week ago. With investors seeking clues on the trajectory of Fed rate increases, a report today showed new- home construction unexpectedly fell in September, while permits rose more than forecast. Separately, the Fed’s Beige Book survey of regional conditions showed a “mostly positive” outlook for the economy.
     With Wednesday’s advance, the S&P 500 further trimmed its third consecutive monthly decline — and its first October slide since 2012 — to 1.1 percent. The benchmark closed today 2.1 percent below an all-time high reached in August.

Have a wonderful evening everyone.

Be magnificent!

Order is the very essence of the universe –
the order of birth and death and so on.  It is only man that seems to live in disorder, confusion.
He has lived that way since the world began.
Krishnamurti

As ever,

Carolann

Any human anywhere will blossom in a hundred unexpected talents and capacities
simply be being given the opportunity to do so.
    -Doris Lessing, 1919-2013
(British novelist born in Persia)

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

Tel: 778.430.5808
(C): 250.881.0801
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www.carolannsteinhoff.com