August 26, 2016 Newsletter

Dear Friends,

Tangents:
August 26, 1883: Krakatoa erupts, killing 36,000.
On Aug. 26, 1920, the 19th Amendment to the U.S. Constitution, guaranteeing women the right to vote, was declared in effect

It’s the last weekend in August, so enjoy….which is what I’m just headed out to do.

After all, tomorrow is another day. –Margaret Mitchell, 1900-1949.

PHOTOS OF THE DAY

Pokeburgs, hamburgers in the form of Pokemon characters, are seen at Down N’ Out Burger restaurant in Sydney, Australia on Friday. The restaurant sells a limited number of Pokeburgs per day, with the names (L-R) Chugmander, Peakachu and Bulboozaur, capitalizing on fans’ appetite for Pokemon Go, the location-based augmented reality game. Jason Reed/Reuters

Two-time World Medieval Jousting champion Rod Walker poses for a photograph on his horse ‘Crusader’ in Sydney, Australia on Friday. Walker is in Sydney training for the jousting tournament at the upcoming St Ives Medieval Faire, the only solid wood lance joust tournament in the southern hemisphere, which will take place September 24-25. Dan Himbrech/AAP/Reuters
Market Closes for August 26^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks edged higher, as speculation the U.S. Federal Reserve could raise interest rates as soon as September lifted banks, offsetting declines in raw-materials producers.
     The S&P/TSX Composite Index rose 0.1 percent to 14,639.88 at 4 p.m. in Toronto, paring a second-straight weekly decline. Trading volume today was in line with the 30-day average.
     The case to raise interest rates is getting stronger in the U.S. as the economy approaches the central bank’s goals, Fed Chair Janet Yellen said in the text of a speech Friday in Jackson Hole, Wyoming. Fed Vice Chairman Stanley Fischer said Yellen’s comments leave the door open for an interest-rate hike in September, which helped boost the dollar and weighed on commodities.
     Raw-materials stocks ended 0.4 percent lower after wiping out a 2.2 percent climb. Commodities producers from Potash Corp. of Saskatchewan Inc. and Methanex Corp. declined at least 1.8 percent, while precious metals companies held onto gains. Detour Gold Corp. added 1.8 percent. The group rose Thursday after capping a four-day slide and the biggest drop in more than three months on Aug. 24. Energy companies pared gains after rising 1.1 percent. Gold futures in New York settled little changed after swinging between gains and losses.
     “Rates aren’t going to above 2 percent, so even if there is a hike, they’re retaining maximum flexibility for the rest of the year and into the next,” said Frank Maeba, managing partner at Breton Hill Capital in Toronto. His firm manages C$1.4 billion. “What she’s doing is quelling future uncertainty. Even if we do hike, you guys are being a little bit myopic.”
     Canadian Imperial Bank of Commerce added 0.5 percent for a sixth-straight gain, the longest streak in more than two months, as financial services stocks increased 0.2 percent, one of five industries to advance in the S&P/TSX.
     CIBC, Toronto-Dominion Bank, Royal Bank of Canada and Bank of Montreal all topped analysts’ expectations this week, driving a 1.5 percent weekly advance for financial service stocks that’s the most in six weeks. Bank of Nova Scotia, the nation’s third- largest lender, is on deck to report on Aug. 30.
     After a first-half rally, raw-materials producers have lost steam in August, with the group the worst performer among 10 industries in the S&P/TSX, slumping 8.5 percent. Meanwhile health-care stocks are up 19 percent for the biggest advance, led by Valeant Pharmaceuticals International Inc.’s 38 percent rally in August. The drugmaker affirmed its 2016 outlook earlier this month, restoring some confidence in analysts and investors in its turnaround strategy.
     The materials group remains on track for the first annual advance in six years, up 47 percent this year, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 21 percent in the same period, on pace for the strongest in seven years.
     That’s boosted the Canadian equity benchmark to a more than 12 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 23.2 for the S&P/TSX, opening up a 14 percent premium over the S&P 500 Index.
     Torstar Corp., owner of the Toronto Star, Canada’s largest circulation newspaper, jumped 7.7 percent, the biggest increase in a month. Fairfax Financial Holdings Ltd. bought 3.5 million shares of the company, boosting its stake to more than 27 percent.

US
By Anna-Louise Jackson, Dani Burger and Oliver Renick
     (Bloomberg) — U.S. stocks slipped in a volatile session, as remarks from Federal Reserve officials lifted optimism on the economy while also bolstering speculation interest rates could rise as soon as next month.
     A speech by Fed Chair Janet Yellen sparked an early surge in equities amid a bullish economic assessment, which included a lack of clear guidance on when a rate boost may come. Equities then tumbled after Vice Chairman Stanley Fischer said Yellen’s comments were consistent with a possible September increase, only to recover much of their losses in a final-hour rebound.
     Utilities and phone companies led the declines, while banks, technology and health-care shares climbed.
     “Fischer wants to make September still on the table,” said Mark Kepner, managing director and equity trader at Themis Trading LLC in Chatham, New Jersey. “He mentioned he’s not concerned about the low growth we have had the first six months. He’s saying growth is more a productivity and investment story. There are light volumes, lightly staffed desks and these moves can easily happen.”
     The S&P 500 Index fell 0.2 percent to 2,169.04 at 4 p.m. in New York, after rising as much as 0.7 percent. The gauge extended a monthly slide and capped its first back-to-back weekly drop in two months. The Dow Jones Industrial Average lost 53.01 points, or 0.3 percent, to 18,395.40, after wiping out a 123-point gain. The Nasdaq Composite Index rose 0.1 percent. About 6.6 billion shares traded hands on U.S. exchanges, 3 percent below the three-month average.
    Expectations for a rate increase climbed after Fischer spoke, with traders pricing in a 42 percent probability of a move next month, from 32 percent after Yellen’s remarks. Odds are now nearly 63 percent the central bank will act by December, up from 42 percent two weeks ago, based on fed fund futures data compiled by Bloomberg.
     “In light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months,” Yellen said in the text of a speech to central bankers and economists in Jackson Hole, Wyoming.
     Wagers on higher borrowing costs had increased amid a chorus arguing the case for policy tightening. Kansas City Fed President Esther George yesterday reiterated her call that higher rates are warranted, while Dallas Fed chief Robert Kaplan said “the case is strengthening” for another increase. They joined New York Fed chief William Dudley and his San Francisco counterpart John Williams who signaled last week a rate increase could be on the table in coming months.
     “At the end of the day, headlines weren’t as dramatic as people were scared they might be,” said Walter Todd, who oversees about $1.1 billion as chief investment officer for Greenwood Capital Associates LLC in South Carolina. “It doesn’t appear she’s pounding the table saying rates are going up next month.”
     The rally that drove the S&P 500 to a series of records since early July lost momentum amid the recent hawkish remarks from Fed officials and uneven economic data. The benchmark posted its first three-day slide in two months, interrupting a period of calm that had the CBOE Volatility Index on track for its lowest mean level for any August since 1994. The measure of market turbulence known as the VIX held at a seven-week high, little changed Friday after swinging between an 11 percent drop and a nearly 10 percent jump.
     With policy makers assessing data to guide their rate decisions, a report today showed the U.S. economy grew less than previously reported last quarter, capping a sluggish first-half performance propped up mainly by consumer spending. A separate measure showed consumer confidence eased in August to a four- month low as Americans become less optimistic about their finances for the year ahead.
     As the earnings season wraps up, almost 80 percent of S&P 500 companies have beaten profit estimates, while 55 percent topped sales expectations. Analysts estimate third-quarter income for the gauge’s members will contract for a sixth- straight quarter, forecasting a 1.3 percent decline.
     In Friday’s trading, seven of the S&P 500’s 10 main industries retreated. Stocks perceived as defensive were hardest hit, continuing a recent about-face among this year’s leaders as utilities and phone companies slumped more than 1 percent, while consumer staples lost 0.5 percent. Raw-materials producers lost 0.6 percent as a gauge of the dollar surged the most in two months.
     Among shares moving on corporate news, Autodesk Inc. jumped 8.1 percent to a record after surprising investors with a quarterly profit, and forecasting a narrower-than-estimated loss in the current period. Ulta Salon Cosmetics & Fragrance Inc. sank 6.1 percent, the most since November, as its current- quarter outlook disappointed.
     Herbalife Ltd. declined 2.3 percent to a six-week low, after losing as much as 7.8 percent. Hedge fund manager Bill Ackman told CNBC that top investor Carl Icahn is trying to sell his stake in the nutrition company. Herbalife declined to respond to Ackman’s comments, while representatives for Icahn and Ackman didn’t immediately respond to requests for comment.
     Alere Inc. slipped 2.8 percent after suing Abbott Laboratories to compel the completion of their pending $5.8 billion takeover deal, claiming the medical-device maker failed to get U.S. antitrust clearance in an effort to scuttle the contentious transaction. Abbott was little changed.

Have a wonderful weekend everyone.

Be magnificent!

When the life of a man, freed from all distractions, finds its unity in the spirit,
the knowledge of the infinite comes to him immediately and naturally,
like a light from a flame.
Rabindranth Tagore

As ever,

Carolann

One is happy as a result of one’s own efforts, once one knows the necessary ingredients of happiness –
simple tastes, a certain degree of courage, self denial to a a point, love of work, and above all,
a clear conscience.
Happiness is no vague dream, of that I now feel certain.
                          -George Sand, 1804-1876

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