October 28, 2016 Newsletter

Dear Friends,

Tangents:

We have a Japanese maple tree which is planted near the entrance to our house – it is a dazzling thing to see at this time of year as the leaves have turned iridescent scarlet.  I always look forward to autumn – because I know the beauty the season brings as it transforms nature.  I love this poem that Jackie Kennedy wrote (she was still Jacqueline Bouvier at the time she wrote it in 1943):

THOUGHTS
  –by Jacqueline Bouvier

I love the Autumn.
And yet I cannot say
All the thoughts and things
That make one feel this way.

I love walking on the angry shore;
To watch the angry sea;
Where summer people were before
But now there’s only me.

I love wood fires at night
That have a ruddy glow.
I stare at the flames
And think of long ago.

I love the feeling down inside me
That says to run away
To come and be a gypsy
And laugh the gypsy way.

The tangy taste of apples,
The snowy mist at morn,
The wanderlust inside you
When you hear the huntsman’s horn.

Nostalgia – that’s Autumn,
Dreaming through September
Just a million lovely things
I always will remember.
                             -1943

On Oct. 28, 1886, the Statue of Liberty, a gift from the people of France, was dedicated in New York Harbor by President Grover Cleveland.
Also on this day in 1962, Soviet Union leader Nikita Khrushchev agrees to remove Russian missiles from Cuba, ending the Cuban Missile crisis.

PHOTOS OF THE DAY

A cyclist rides through an autumn colored landscape near Dormagen, western Germany, on Friday. Federico Gambarini/dpa/AP
A man walks on Thufa hill in Reykjavik, Iceland, on Friday. Parliamentary elections will be held in Iceland on Saturday. More than 250,000 voters will elect the new 63-member Parliament. Frank Augstein/AP

A rainbow appears shortly after dawn in Santa Monica as one of a series of storms sweeps through California on Friday. Reed Saxon/AP
Market Closes for October 28^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Number of the Day
$248.9 billion
The value merger agreements struck this month for U.S. companies, according to Dealogic, surpassing the previous record of $240 billion in July 2015.
Canada
By John Hyland
     (Bloomberg) — Canadian stocks declined after the nation’s largest industries slumped amid global concerns, ranging from OPEC production cuts to the U.S. presidential election.
     The S&P/TSX Composite Index fell 0.3 percent to 14,785.29 at 4 p.m. in Toronto, erasing an advance in afternoon trading after the U.S. Federal Bureau of Investigation said it’s reopening an inquiry into Hillary Clinton’s use of private e- mail. The gauge lost 1 percent for the week, with health-care and real estate shares taking the biggest hits. The S&P/TSX is up almost 14 percent in 2016, the top performance among developed equity markets tracked by Bloomberg.
     Financial stocks fell 0.4 percent as four of the largest banks declined, while Manulife Financial Corp. slumped 1.3 percent, the most in a month. Energy producers lost 1.2 percent as crude tumbled in New York to the lowest in almost four weeks. The losses came as an OPEC committee discussed production targets and as U.S. equities dropped after the FBI disclosed the renewed probe into the Clinton e-mails.
     Suncor Energy Inc., Canada’s biggest energy producer, slumped 0.8 percent, falling from a one-year high. The oil-sands giant swung to a profit in the third quarter after restoring operations that were shut during the Alberta wildfires in May.
     Health-care companies fell 4.6 percent to a four-month low. The sector was dragged down by Valeant Pharmaceuticals International Inc., after the company fell 8 percent to its lowest level since July amid a selloff in U.S. drugmakers. Health-care was the worst-performing sector this week, and is down 73 percent this year, the most ever.
     Raw-materials producers rallied after as a weaker dollar boosted demand for metals as a haven. Barrick Gold Corp., the world’s biggest bullion miner, added 1.5 percent after beating earnings expectations. Goldcorp Inc. gained 0.7 percent.
     Six of the 11 sectors in the benchmark rose today, led by 0.5 percent gains in utilities and raw materials. Utilities reached a five-week high, with Fortis Inc. and Brookfield Renewable Partners LP gaining at least 1 percent.
     Canadian stocks are now 17 percent more expensive than their peers in the S&P 500 Index. The S&P/TSX trades at 23 times earnings, compared with 20 for the S&P 500 Index.
US
By Joseph Ciolli and Anna-Louise Jackson
     (Bloomberg) — U.S. stocks declined, with the S&P 500 Index falling to a six-week low, after the Federal Bureau of Investigation reopened a probe into Hillary Clinton’s use of an unauthorized e-mail server.
     Word of the FBI’s renewed investigation rattled investors, wiping out gains as equities careened down from the day’s highs. An earlier advance came as data bolstered speculation a stronger economy may lift corporate earnings, while rallies in Alphabet Inc. and Chevron Corp. overshadowed a selloff among drugmakers.
     The S&P 500 fell 0.3 percent to 2,126.41 at 4 p.m. in New York, erasing a 0.4 percent advance. The gauge fell as much as 0.6 percent and extended the longest losing streak since June. The Dow Jones Industrial Average slipped 8.49 points to 18,161.19, after reversing a 0.5 percent climb. The Nasdaq Composite Index dropped 0.5 percent, joining the S&P 500 at a six-week low. About 7.4 billion shares traded hands on U.S. exchanges, 14 percent above the three-month average.
     “Clinton is clearly priced to win, and anything that disrupts the market’s predictions will have an adverse reaction,” said Michael Antonelli, an institutional equity sales trader and managing director at Robert W. Baird & Co. in Milwaukee. “The market has to re-price for a new level of uncertainty, and we’re now dealing with a big heaping teaspoon of it. It has to change its probabilities and change how it’s thinking.”
     It’s not the first time U.S. stocks have been sensitive to perceptions about Clinton’s political prospects. Futures on the S&P 500 rallied three-quarters of a percent during the first presidential debate, when her odds of winning shot up on online prediction markets. A win by Donald Trump “would reduce the value of the S&P 500, the U.K., and Asian stock markets by 10-15%,” economics professors Justin Wolfers and Eric Zitzewitz say in paper released by Brookings Institute.
     “The FBI has learned of the existence of emails that appear to be pertinent to the investigation,” FBI Director James Comey said in a letter to eight committee chairmen in Congress. “I agreed that the FBI should take appropriate investigative steps designed to allow investigators to review these emails to determine whether they contain classified information.”
     Equity markets have been wagering on a Clinton victory, with the latest RealClear Politics poll average showing her with an advantage of about 5 points. Stocks have been stuck in a range of about 65 points since August as the looming presidential election and expectations for higher interest rates upstage a recovery in corporate profits. The S&P 500 capped a third weekly decline in four, losing 0.7 percent.
     “What it says to me is that the market is pretty fragile here and that any bit of small news can tip this thing,” Peter Cecchini, co-head of equities and chief market strategist at Cantor Fitzgerald, said in an interview on Bloomberg Television. “A Trump victory would be quite disruptive to the market because of the uncertainty.”
     Following the Clinton news, traders pared bets on a December interest-rate increase by the Federal Reserve, with odds slipping to 70 percent from 74 percent earlier. They’re pricing in a less than 20 percent chance the central bank will act at next week’s meeting, just days before the U.S. vote.
     A report today showed gross domestic product increased the most in two years last quarter as a build in inventories and a soybean-related jump in exports helped cushion softer household spending. Separately, consumer confidence dropped more than previously reported to match the lowest level since 2014.
     “This confirms further the acceleration in the economy that will give the Fed further confidence to raise rates in December,” said Michael Arone, the Boston-based chief investment strategist at State Street Global Advisors’ U.S. intermediary business. “It was good to see some additional contributions to GDP from something other than the consumer — we’ve been looking for that to broaden the growth and it looks like we got some signs of that here in the third quarter.”
     As one of the busiest weeks of the earnings season draws to a close, 78 percent of S&P 500 firms that reported this season beat profit projections and 58 percent topped sales estimates. Analysts now expect quarterly earnings growth of 1.6 percent for benchmark members, reversing forecasts for a 1.6 percent decline at the start of the month. If the prediction holds, it will end the longest earnings recession since the financial crisis.
     Prior to the afternoon swoon, equities were cruising higher on gains from Google parent Alphabet and Chevron’s strongest rally since March, as investors cheered their quarterly results. Those moves had been enough to overcome Amazon.com Inc.’s steepest drop in eight months on a disappointing outlook, and as drug distributor McKesson Corp. plunged the most since 1999 to lead health-care lower.
     Among other shares moving on earnings news:
     * Hershey Co. rose the most since June after boosting its full- year earnings forecast.
     * AbbVie Inc. sank 6.3 percent after its profit narrowly beat analysts’ estimates, while its top-selling arthritis injection, Humira, fell short of predictions.
     * Amgen Inc. suffered its steepest drop in 15 years after sales of the company’s biggest product fell amid increasing price pressure.
     * Mastercard Inc. gained 3.2 percent to a record as profit and revenue beat predictions at the second-largest U.S. payments network.
     Bucking a historical trend that has seen October post the biggest gains on average of any month over the past 25 years, the S&P 500 is on its way to a decline. It’s down 1.9 percent for the period, the worst since a plunge at the start of the year.
     In Friday’s trading, five of the S&P 500’s 11 main industries rose, led by a 0.7 percent gain in industrials. Health-care fell 2.2 percent to a seven-month low. The CBOE Volatility Index increased 5.4 percent, stretching gains to a fourth day, the most since August. The measure of market turbulence known as the VIX climbed 21 percent for the week.
     Honeywell International Inc. and United Technologies Corp. added more than 0.9 percent to join General Electric Co. in powering the industrials. GE rose 2.1 percent after saying it’s in discussions with Baker Hughes Inc. to form unspecified partnerships. Fortive Corp. and Stericycle Inc. jumped more than 5.7 percent after their profits topped forecasts.
     McKesson’s 23 percent tumble led health-care lower, after cutting its annual forecast in response to aggressive price competition. That dragged down competitors, with AmerisourceBergen Corp. and Cardinal Health Inc. slumping more than 9.7 percent, the biggest declines for each in at least seven years. Merck & Co. slid 4 percent, the most in 14 months.
Have a wonderful weekend everyone.

Be magnificent!

To understand pleasure is not to deny it.
We are not condemning it or saying it is right or wrong but if we pursue it,
let us do so with our eyes open, knowing that a mind that is all the time seeking pleasure
must inevitably find its shadow in pain.
They cannot be separated, although we run after pleasure and try to avoid pain.
Krishnamurti

As ever,

Carolann

The immortal gods alone have neither age nor death.
All other things almighty Time disturbs.
                         -Sophocles, 498 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

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