August 19, 2016 Newsletter

Dear Friends,

Tangents:

To Aphrodite of the Flowers, at Knossos
                                         – SAPPHO

Leave Crete and come to this holy temple
where the pleasant grove of apple trees
circles an altar smoking with frank-
      incense.

Here roses leave shadow on the ground
and cold springs babble through apple branches
where shuddering leaves pour down pro-
     found sleep.

In our meadow where horses graze
and wild flowers of spring blossom,
anise shoots fill the air with a-
     roma.

And here, Queen Aphrodite, pour
heavenly nectar into gold cups
and fill them gracefully with sud-
    den joy.

PHOTOS OF THE DAY

Germany’s Daniel Deusser, riding First Class, competes during the equestrian individual jumping competition on Friday. John Locher/AP

Team Ukraine competes in the synchronized swimming free routine final on Friday. Stefan Wermuth/Reuters
Market Closes for August 19^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Nearly 500 million people are living in countries with negative interest rates, according to S&P Global — a factor that could fuel a return to a “cash-only” society, and people putting savings in personal safes rather than banks. CNBC
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks ended Friday’s session little changed, with banks climbing to offset declines in raw- materials producers as gold prices fell amid a rallying dollar.
     The S&P/TSX Composite Index slipped 0.1 percent to 14,687.46 at 4 p.m. in Toronto, as the benchmark lost 0.4 percent this week. Trading volume was 22 percent lower than the 30-day average.
     Barrick Gold Corp. and Yamana Gold Inc. retreated at least 1.4 percent as raw-materials producers dropped 1.5 percent. Five of 10 industries in the S&P/TSX fell today. Gold futures lost 0.8 percent in New York, paring this week’s gain. Silver Wheaton Corp. sank 3.7 percent.
     Banks climbed amid speculation that interest rates are going higher, with Royal Bank of Canada rising 1 percent to the highest close in in 16 months. Insurer Manulife Financial Corp. added 2.1 percent for its best gain in five weeks.
     U.S. equities slipped in the week’s final session, as the dollar rallied the most in a month against major peers. Fed Bank of San Francisco President John Williams said Thursday it made sense to get back to a pace of gradual rate increases, preferably sooner rather than later. Williams is the latest Fed official this week to suggest rates could rise sooner, while July minutes released Wednesday showed policy makers remain split on the prospect. Traders have priced in a 51 percent chance of a rate hike in December.
     Health-care stocks fell 0.6 percent, paring a weekly gain to 9.1 percent. Valeant Pharmaceuticals International Inc. ended the day down 0.6 percent, to finish with a 15 percent weekly gain after a tumultuous five days. T. Rowe Price Group Inc. yesterday filed a lawsuit against the drugmaker, accusing its executives of using deceptive practices to artificially inflate its revenue and profit.
     A Valeant spokeswoman said the complaint repeats allegations and claims made in a suit filed last October that seeks class-action status, and the company “intends to defend itself.” Valeant also secured looser debt requirements, while two analysts upgraded their ratings for the stock this week.
     Raw-materials producers have led the rally in Canadian equities in 2016, surging 58 percent as the top gainers among 10 industries in the S&P/TSX. It’s the best year-to-date performance for the category in at least 30 years, according to data compiled by Bloomberg. Energy producers have gained 22 percent in the same period.
     That’s boosted the Canadian equity benchmark to a 13 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 23.4 for the S&P/TSX, about 14 percent higher than the S&P 500 Index.

US
By Dani Burger
     (Bloomberg) — U.S. stocks slipped for the first time in three days, with a recent rally showing signs of tiring amid elevated valuations and rising speculation that borrowing costs will increase before year-end.
     Investors sold this year’s winners, with phone companies capping their worst week since 2014, while utilities and energy producers also led the retreat. Better-than-estimated earnings from Deere & Co., Applied Materials Inc. and Foot Locker Inc. helped keep a lid on declines, with shares of the three surging more than 7 percent. Nike Inc. gained 3 percent, boosted by Foot Locker’s results.
     The S&P 500 Index fell 0.1 percent to 2,183.87 at 4 p.m. in New York, barely erasing an advance for the week. The benchmark has gone 30 days without a 1 percent move in either direction, the longest since 2014. The Dow Jones Industrial Average lost 45.13 points, or 0.2 percent, to 18,552.57. The Nasdaq Composite Index slipped less than 0.1 percent. About 5.7 billion shares traded hands on U.S. exchanges, 17 percent below the three-month average.
     “The daily movements are really a function of a fully valued market that’s trading at its highs in a narrow range,” said Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co., which oversees $9.6 billion in Bryn Mawr, Pennsylvania. “One of the more major announcements this week was the Fed FOMC minutes which indicated if nothing else a lack of unanimity in the FOMC. The markets interpreted that as uncertainty which therefore means no action from the Fed. The markets are just hanging in there.”
     A dovish tone in minutes released Wednesday from the last Federal Reserve meeting contrasted with hawkish remarks this week from New York Fed President William Dudley and San Francisco’s John Williams. The two sought to remind investors that a rate increase could come at any meeting, particularly if jobs data continued to improve. Fed Chair Janet Yellen will speak Aug. 26 at a meeting of global policy makers in Jackson Hole, Wyoming.
     Traders’ bets on higher rates have been pushed forward with December now the first month showing at least even odds of an increase, a 51 percent probability versus 42 percent a week ago. That helped put a gauge of the dollar on track for its best gain in a month. 
     The recent advance in U.S. equities has lost some steam amid shifting speculation over the Fed’s timing. The S&P 500 slipped less than 0.1 percent for the week after a 9.2 percent rebound that netted 10 fresh records since the shock of the U.K. secession vote in late June. Optimism that central banks will maintain their efforts to bolster growth, better-than-forecast earnings and continued signs of a strengthening labor market have helped boost stock valuations to the highest of the seven- year bull market.
     As the earnings season winds down, results have proved generally better than expected with nearly 80 percent of S&P 500 members beating profit projections, while more than half topped sales estimates. Analysts curbed their estimates for a contraction in net income to down 2.3 percent, from a 5.7 percent drop just before the reporting period began. Predictions show a 0.9 percent decline in profits for the quarter ending in September, which would be a sixth consecutive drop, the longest since the financial crisis.
     “We’ve had a big rally, and there’s this correlation with oil and that’s what spooks the market,” said Patrick Spencer, London-based vice chairman of equities at Robert W. Baird, which manages $151 billion. “Earnings are key and we’ve got to watch the dollar closely. If that was to strengthen meaningfully one would need to get concerned about the U.S. market.”
     In Friday’s trading, seven of the S&P 500’s 10 main industries retreated, with utilities losing 1.2 percent while phone and energy companies slid more than 0.8 percent. The three groups are the benchmark’s best performers year to date, with gains of at least 15 percent. The CBOE Volatility Index fell 0.8 percent to 11.34, wiping out a gain of more than 7 percent. The measure of market turbulence known as the VIX marked its seventh weekly decline in the last eight.
    Oil and gas companies fell from a nine-month high, even as crude rose again after entering a bull market yesterday. The commodity capped its strongest weekly increase in five months. 
    Exxon Mobil Corp. and Chevron Corp. sank at least 1.1 percent, while Kinder Morgan Inc. declined 1.9 percent. Southwestern Energy Co. slid the most, losing 4.6 percent.
     Wal-Mart Stores Inc. weighed on consumer staples, dropping 2 percent to erase a rally yesterday sparked by a stronger profit forecast. Estee Lauder Cos. decreased 3.5 percent as its earnings outlook was short of estimates. 
     Technology shares edged higher as Applied Materials’ results and its best gain in three months lifted other semiconductor stocks. Micron Technology Inc. added 3 percent, while Lam Research Corp. gained 2.5 percent. The Philadelphia Stock Exchange Semiconductor Index rose to the highest since October 2000.
     Deere surged more than 13 percent, the best since 2008, after raising its full-year profit outlook amid cost cuts. Industrials were mixed, however, with airlines slipping and Emerson Electric Co. falling 3.1 percent after agreeing to buy Pentair Plc’s valves and controls business for $3.15 billion in cash.
     Ross Stores Inc. rallied 3.5 percent to a record after its results beat estimates, joining Foot Locker to buoy consumer- discretionary shares. Nike hit a three-month high, while Gap Inc. added 3.9 percent to its highest since April 7 after earnings that narrowly topped analysts’ estimates gave hope to the retailer’s comeback.
     –With assistance from Roxana Zega.

Have a wonderful weekend everyone.

Be magnificent!

Within, everything is connected.
This is because an action in one part produces a similar reaction elsewhere
and thus a response.
Swami Prajnanpad

As ever,

Carolann

Just as at the Olympic games it is not the handsomest or strongest men
who are crowned with victory but the successful competitors, so in life
it is those who act rightly who carry off all the prizes and rewards.
                                                -Aristotle, 384-322 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