March 11, 2016 Newsletter

Dear Friends,

Tangents:

March 11, 1935 – Birth of the Bank of Canada

Choosing to Get Wet in the Rain

We create ourselves a lot of needless fuss and bother by huffing and puffing and trying to keep dry during a rainstorm.   How liberating it is to abandon all ideas of dryness and give yourself up to the downpour.  Don’t run, stroll.  Look up, smile, and enjoy the sensation of water from the heavens refreshing your careworn face.  The wetter you get the more free you will feel.  Once inside and standing, dripping, on your mat at home the laughter will begin to take hold.  You remove your sodden wet suit and make a dash for the bathroom (so much better if you don’t happen to be on your own).  Every inch of you is utterly drenched as huge great globules of water dribble down your nose.  Dry yourself off, wrap yourself in a dressing gown and devour a pack of biscuits on the sofa with a cup of smouldering tea.  –Tom Hodgkinson, The Book of Idle Pleasures, Random House.

PHOTOS OF THE DAY

A visitor prays in front of candles in Tokyo to mourn the March 11, 2011, tsunami and earthquake victims. Friday is the five-year anniversary of the disaster that killed thousands and set off a nuclear crisis. Yuya Shino/Reuters

The Proton rocket, that will launch the ExoMars 2016 spacecraft to Mars, is transfered to the launchpad at the Baikonur cosmodrome in Kazakhstan in this handout photo released by the European Space Agency (ESA) Friday. Stephane Corvaja/ESA/Reuters

A woman walks her dog on Wandsworth Common on a foggy morning in London Friday. Hannah McKay/Reuters

Market Closes for March 11^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian stocks rose, joining a rally in global markets as growing optimism on European stimulus overshadowed a surprise increase in Canada’s jobless rate.

     The Standard & Poor’s/TSX Composite Index rose 1.1 percent to 13,522 at 4 p.m. in Toronto, to the highest since Dec. 1 while capping a second weekly increase. The resurgent S&P/TSX is one of the best-performing developed markets in the world this year, vying with New Zealand for the top spot as the only nations higher in 2016, while posting returns ahead of the U.S., Germany and U.K.

     Global stocks rebounded from yesterday’s losses as investors reconsidered the aggressive stimulus package unveiled by European Central Bank President Mario Draghi Thursday that included lowered interest rates and increased bond purchases. Markets whipsawed after Draghi said in later comments the central bank is done with cutting borrowing costs for now.

     Canada’s unemployment rate unexpectedly climbed to 7.3 percent in February, the highest since March 2013 as the nation continues to struggle with the impact of lower oil prices. Employers eliminated a net 2,300 jobs, Statistics Canada said Friday. Economists surveyed by Bloomberg had projected a 10,000- job increase and an unchanged jobless rate.

     “Today’s report indicates continued flat employment growth which is contributing to a rise in the unemployment rate, though the bigger factor is stronger labor force gains,” said Paul Ferley, assistant chief economist at RBC Capital Markets, in a note to clients. Job losses in the natural resource industries, hard-hit by the collapse in crude prices of the past year, are being offset by gains elsewhere, Ferley said.

     Canada’s equity benchmark has benefited from the recent rebound in commodities prices, from crude to copper and precious metals. The index has clawed back rapidly after entering a bear market in January. A slide in 2015 resulted in the worst annual performance since the financial crisis.

     Shares in the Canadian gauge now trade at about 21 times earnings, roughly 18 percent more expensive than the valuation of the benchmark U.S. equity index, the Standard & Poor’s 500 Index, data compiled by Bloomberg show. 

     Energy producers increased 1.7 percent as eight of 10 industries advanced in the broader S&P/TSX. Canada’s largest lenders rose, after halting a five-day rally Thursday. Royal Bank of Canada and Bank of Nova Scotia gained at least 1.1 percent. Raw-material and phone companies were the only laggards. BCE Inc. slipped 0.8 percent.

     Suncor Energy Inc. and Canadian Natural Resources Ltd. rose at least 1 percent. Crude prices in New York added 1.7 percent for a fourth weekly gain, the longest winning streak since May, amid signs of rising U.S. fuel demand and easing crude production. Cenovus Energy Inc. jumped 4.7 percent after the stock was added to Goldman Sachs Group Inc.’s Americas conviction list.

     Canadian National Railway Co. and Canadian Pacific Railway Ltd. gained at least 1.5 percent to boost the industrials group to a 1.6 percent gain, erasing a 1.2 percent drop yesterday.

US

By Dani Burger

     (Bloomberg) — U.S. stocks joined a global rally, sending the Standard & Poor’s 500 Index to its highest close this year, as investors reassessed stimulus measures in Europe and warmed to the steps taken to boost growth.

     Banks and commodity shares were the best performers, continuing to pace a monthlong advance. Citigroup Inc. and Wells Fargo & Co. added more than 2.6 percent. Dow Chemical Co. gained 3.1 percent while Anadarko Petroleum Corp. jumped to a two-month high as crude posted its longest run of weekly gains since May.

     The S&P 500 rose 1.6 percent to 2,022.19 at 4 p.m. in New York, capping a fourth straight week of gains, the most since November. The gauge finished above its average price during the past 200 days for the first time this year, ending its longest streak below that threshold since 2011. The Dow Jones Industrial Average added 218.18 points, or 1.3 percent, to 17,213.31. It also closed at a 2016 high and above its 200-day moving average. The Nasdaq Composite Index gained 1.9 percent.

     “Any aggressive moves to stimulate growth to keep expansion on track is positive,” said Joe Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management. “Global recessionary fears have receded, and that has been key. What the ECB did yesterday helped that momentum. What’s key for U.S. investors is the euro-dollar rate, and that’s back up which is good news for U.S. earnings and for affiliates of multinationals.”

     Equities rallied Friday after a late-day rebound yesterday erased a selloff in the wake of expanded measures announced by the European Central Bank, along with comments by President Mario Draghi that suggested further cuts to interest rates were not likely. Investors today shrugged off worries the ECB steps might not be enough to revive growth, and piled back into shares that have carried the S&P 500’s recovery from a 22-month low last month, including energy, raw-materials, technology and financial companies.

     The S&P 500 has rebounded more than 10 percent since a Feb. 11 low and trimmed its 2016 drop to less than 1.1 percent, after losses of as much as 11 percent amid concern over China’s economic slowdown and a deepening oil rout.

     Investor sentiment in the aftermath of the ECB’s announcements, swinging from optimism the stimulus could boost growth to concern the measures would fall short, illustrates the tension in markets and the challenges central banks face in mollifying them after seven years of unconventional policy maneuvers.                          

     In the U.S., the Federal Reserve’s two-day meeting next week may further illuminate the trajectory of interest rates. While traders are pricing in little chance of an increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now about 51 percent, from less than 2 percent a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities.

     Fed officials have stressed that the pace of rate increases, following December’s first boost since 2006, will be gradual and data-dependent. Reports on retail sales, industrial production and housing starts are due next week before the meeting.

     “The market is now looking forward to the Fed decision next week so it’s going to be pretty quiet,” said Patrick Spencer, equities vice chairman at Robert W. Baird & Co. in London. “This is the most hated bull market ever, but it’s all bubbling up back again.”

     The Chicago Board Options Exchange Volatility Index fell 8.6 percent Friday to 16.50, the lowest this year. That helped reverse gains Monday and Tuesday in the measure of market turbulence known as the VIX, as it finished lower for a fourth week, the most since October. About 7.5 billion shares traded hands on U.S. exchanges, 15 percent below the 2016 average.                     

     All of the S&P 500’s 10 main industries increased, with seven groups rising more than 1.4 percent. Energy and financial shares rose at least 2.2 percent while raw-materials gained 1.8 percent. More defensive sectors such as consumer staples, utilities and phone companies lagged, while consumer discretionary shares advanced 1.6 percent.

     Energy producers posted their fourth consecutive week of gains, the longest winning streak since May. West Texas Intermediate crude rose 1.7 percent, topping $38 a barrel, amid signs of rising U.S. fuel demand and easing crude production.

Southwestern Energy Co. and Devon Energy Corp. advanced at least 10 percent. Anadarko Petroleum, which yesterday said it was cutting 1,000 jobs to cope with lower oil prices, added 8.9 percent.

     Fertilizer maker CF Industries Holdings Inc. gained 6 percent as the strongest performer in raw-materials. DuPont Co. advanced 2.7 percent and Monsanto Co. climbed 2.2 percent. Agriculture prices saw the longest rally in four years, as adverse weather and rising demand finally help to reduce the outlook for global gluts of food supplies.

     Banks in the benchmark posted their strongest advance since March 1 amid speculation higher bond yields would help boost profitability. The 10-Year U.S. Treasury yield reached its highest since January. Citizens Financial Group Inc. and SVB Financial Group increased at least 4 percent. The KBW Bank Index added 2.9 percent, closing at a one-week high.                     

     Insurance providers also helped lift the index, advancing 2.8 percent. Lincoln National Corp. gained 5.1 percent to a two- month high, while Principal Financial Group Inc. and MetLife Inc. added at least 4.7 percent. The companies, among the most sensitive to interest rates, posted their third consecutive day of gains.

     Symantec Corp. jumped 3.9 percent after RBC Capital Markets Corp. upgraded the company amid growing demand for security products. Micron Technology Inc. and Western Digital Corp. gained more than 4.1 percent, buoying technology companies in the index. Intel Corp. climbed 1.6 percent to its highest since Jan. 14. People familiar with the matter said the chipmaker is planning to sell part of its venture capital unit, assets that could be worth as much as $1 billion.

     An S&P index of homebuilders extended a climb to a fourth week, the longest since June. The measure is up 21 percent in the past month after losing nearly 22 percent in the first six weeks of the year. D.R. Horton Inc. posted its best climb in four months, up 5.2 percent. Toll Brothers Inc. added 3.4 percent.

     The Dow Jones Transportation Average rose 2.3 percent to erase losses during the previous four sessions, as the measure extended a rally to an eighth straight weekly advance, the most since May 2009. Alaska Air Group Inc. surged 5.7 percent to a 2016 high after reporting a 13 percent increase in February traffic. Norfolk Southern Corp. climbed 4.3 percent, the railroad’s biggest one-day gain since November.

Have a wonderful weekend everyone.

Be magnificent!

Meditation can take place when you are sitting in a bus,

or walking in the woods full of light and shadows,

or listening to the singing of the birds,

or looking at the face of your wife or child.

Krishnamurti

As ever,

Carolann

You only grow when you are alone.

        -Paul Newman, 1925-2008

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