June 13, 2016 Newsletter

Dear Friends,

Tangents:

Fantastic entertainment at last night’s Tony Awards.  As expected, Hamilton cleaned up with 11.  I must say that to date, it’s the best show I’ve ever seen on Broadway – amazing creativity and talent.

Took in the James Taylor concert on the weekend, and he was fantastic – I think he’s better now than at any time in his career.  I know it’s a big tour in 2016, so if you get a chance to see him at any of his other scheduled appearances, it’s truly a great way to spend an evening.  He is also with an amazing band.

On this day in 1900, China’s Boxer Rebellion erupts.

On June 13, in Canada…

1673 – La Salle builds Fort Cataraqui at today’s Kingston, Ontario

1886 – Fire razes Vancouver in 1/2 hr blaze; 1,000 buildings torched, up to 50 die.

1898 – Birth of the Yukon as Royal Assent given to the Yukon Territory Act

Tweet of the Day:
Pound at 8 week low; $6b net short position on pound as speculators ramp up bearish bet. 10 days out
— Sara Eisen @SaraEisen

Number of the Day
50%
The average of the past six polls on whether the U.K. should leave the EU puts each side on 50%, excluding voters who were undecided or didn’t know, according to NatCen Social Research, a nonpartisan social research agency.

PHOTOS OF THE DAY

The cast of ‘Hamilton,’ winners of the 2016 award for best musical, perform at the Tony Awards at the Beacon Theater on Sunday in New York. Evan Agostini/Invision/AP

Children play on an iceberg on the beach in Nuuk, Greenland. Alister Doyle/Reuters

Market Closes for June 13^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks fell a fourth day, the longest stretch of losses in two months, as global markets retreated on rising anxiety the U.K. will vote to exit the European Union.

     The S&P/TSX Composite Index fell 0.3 percent to 13,993.88 at 4 p.m. in Toronto. The index has lost 2.6 percent over four days, the biggest drop over that stretch of time since Feb. 11. Trading volume today was in line with the 30-day average.

     Global stocks sank a third day. The outlook for global growth remains clouded with uncertainty over when the Federal Reserve will raise rates, the coming Brexit vote and potential volatility stemming from the U.S. election.

     In Canada, the big banks declined at least 0.7 percent with Bank of Nova Scotia and Royal Bank of Canada retreating. Gold producers added 0.8 percent as investors flocked to the precious metal as a store of value.

     A volatility index of S&P/TSX 60 options jumped 12 percent to 18.02, the highest in a month. The gauge has soared 48 percent in four sessions, the biggest increase since August. The S&P/TSX 60 Index is a gauge of the 60 largest, most liquid shares in Canada.

     Canadian equities are still up 7.6 percent this year, trailing only New Zealand as the top performer in 2016 among 24 developed nations. It’s a stark contrast to 2015 when the S&P/TSX tumbled by 11 percent as one of the world’s worst equity markets. Raw-materials producers have boosted the broader rally this year, soaring 45 percent for the best year-to-date performance in three decades.

     Canadian shares remain more expensive relative to their U.S. peers. The S&P/TSX now trades at 21.5 times earnings, about 12 percent higher than the 19.2 times valuation of the S&P 500 Index.

     Penn West Petroleum Ltd. jumped 39 percent, the most since 1992, after the oil and gas explorer agreed to sell all of its Saskatchewan assets for C$975 million in cash to Teine Energy Ltd. Including other assets in Alberta, Penn West will raise C$1.1 billion, with the company now expecting to be “comfortably in compliance” with its financial covenants at the end of the second quarter and the remainder of the year.

     Turquoise Hill Resources Ltd. surged 13 percent, the most in three years, after parent Rio Tinto Group was reported to hire Goldman Sachs Group Inc. to help privatize its copper unit. Rio Tinto is seeking to increase its stake in Turquoise Hill while selling the remaining shares in the company to a strategic buyer, according to the Sunday Times, without saying where it got the information.

US

By Joseph Ciolli

     (Bloomberg) — U.S. stocks dropped, with the S&P 500 Index falling to a three-week low, as investors wavered amid a pair of coming central-bank events and Britain’s vote on European Union membership that have sowed anxiety.

     Equities swung between gains and losses before a retreat accelerated as European stocks closed at their lowest in almost four months. A measure of volatility posted the biggest two-day jump since a selloff last August. Raw-material, industrial and technology shares fell the most, losing more than 1.1 percent. LinkedIn Corp. soared 47 percent after Microsoft Corp. said it’s buying the company in a deal valued at $26.2 billion. Microsoft sank 2.6 percent.

     The S&P 500 fell 0.8 percent to 2,079.06 at 4 p.m. in New York, amid the longest losing streak in a month and the worst three days of losses since Feb. 9. The Dow Jones Industrial Average lost 132.86 points, or 0.7 percent, to 17,732.48. The Nasdaq Composite Index slid 0.9 percent. About 6.7 billion shares traded hands on U.S. exchanges, 4 percent below the three-month average.

     “Concern is lingering about the continued effectiveness of central banks, global growth and worries of deflation,” said Matt Maley, an equity strategist in New York at Miller Tabak & Co LLC. “Everybody’s going to be focused on the Brexit vote, but they have to keep an eye on the other issues as we move forward.”

     As evidence of increasing worry, the CBOE Volatility Index surged 23 percent Monday to 20.97, the most since December and the biggest back-to-back jump since Aug. 24. The measure of market turbulence known as the VIX closed above 20 for the first time since Feb. 29. A preference for safety was also apparent today as U.S. Treasuries extended a rally to a fifth day, the longest since February.

     Recent declines have signaled a shift in sentiment after as much as $3.3 trillion was added to equities since mid-February. Investors are reassessing the rally amid lackluster economic growth and concerns about the potential fallout from a June 23 referendum that will determine Britain’s membershipin the European Union.

     Also keeping investors on edge is the Federal Reserve’s monetary policy review on Wednesday, despite no change predicted for interest rates. Based on Fed funds futures prices, traders don’t see at least even odds for a rate increase until after February. The Bank of Japan also has a policy meeting scheduled this week.

     The S&P 500 rallied as much as 16 percent from a 22-month low in February to approach within 0.6 percent of an all-time, before posting a three-day slide amid simmering growth worries and Brexit anxiety. The index is 2.4 percent from its record set almost 13 months ago, after losing its grip Friday on the 2,100 level, an area where other rallies during the past year have faltered.                     

     “Uncertainties are growing so we have to be very cautious,”  said Leonardo Lara, chief investment officer at FCS Asset Management in Sliema, Malta. His firm manages about 500 million euros ($564 million). “We are concerned about different risks for the global economy — political uncertainties, central banks with no well-defined actions, commodities prices. Investors have more to lose than to win.”

     In Monday’s trading, all of the S&P 500’s 10 main industries declined, with raw-materials, technology and industrial companies falling more than 1.1 percent. Consumer staples, financial and health-care stocks decreased at least 0.7 percent. Utilities were little changed.

     Technology shares in the benchmark slid 1.1 percent, paced by Microsoft’s retreat and a 2.3 percent decrease for Facebook Inc. Short-seller Andrew Left of Citron Research is betting the stock will decline, saying it’s too expensive and will lose market share to competing social media platforms such as Snapchat. Facebook declined to comment. Apple Inc. fell 1.5 percent after Japan’s Nikkei Asian Review reported annual iPhone shipments will fall for the first time since 2007 this year, citing people familiar with the matter.

     Even as the broader technology sector declined, the Solactive Social Media Index rose 3.7 percent, the most since October 2014, as the gauge was boosted by Microsoft’s acquisition of LinkedIn. Twitter Inc. snapped a four-day skid with a 3.8 percent increase.

     Airlines tumbled, dragging industrial shares lower, with a Bloomberg index of U.S. carriers marking the biggest drop in four months. Analysts see lower travel agency sales in the second quarter, in addition to a near-term impact from the mass shooting in Orlando. United Continental Holdings Inc. and American Airlines Group Inc. fell at least 4 percent. The Dow Jones Transportation Average lost 1.1 percent.

     Raw-materials stocks in declined 1.3 percent, led by International Paper Co., which fell 2.8 percent. Dow Chemical Co. and Monsanto Co. lost at least 1.3 percent as the group declined for a third day, the longest losing streak in five weeks.

     Archer-Daniels-Midland Co. led consumer staples companies lower, falling 2.8 percent. Food producers and retailers dropped, with Kroger Co., Kellogg Co. and Whole Foods Market Inc. slipping more than 1.5 percent. Thirty-four of the group’s 36 stocks declined on Monday.

     Energy producers slipped after erasing a 1 percent gain as crude oil faded, closing at a one-week low. Marathon Petroleum Corp. dropped 6.7 percent and Valero Energy Corp. sank 4.5 percent, overshadowing Exxon Mobil Corp.’s 0.7 percent climb, as well as gains of 2 percent in Devon Energy Corp. and Transocean Ltd.

     Among other shares moving, gun makers Smith & Wesson Holding Corp. and Sturm Ruger & Co. rose 6.9 percent and 8.5 percent, respectively, following the massacre at an Orlando, Florida, nightclub Sunday that left 49 people dead. Shares of gun manufacturers typically increase after a mass shooting on speculation that tougher gun-control measures may be enacted, spurring sales before any new measures take effect.

     Symantec Corp. added 5.3 percent, the most in 14 months, as it plans to purchase Blue Coat Systems Inc. for about $4.65 billion in cash, a deal that will add to its cyberdefense technology and fill a high-turnover chief executive officer position.

Have a wonderful evening everyone.

Be magnificent!

Economic equality is the master key to nonviolent independence.

Mahatma Gandhi

As ever,

Carolann

When something bad happens we have three choices. We can let it define us,

we can let it destroy us or we can let it strengthen us.

                                                                   -Frank Langella, 1938-    

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