March 17, 2016 Newsletter

Dear Friends,

Tangents:

HAPPY ST. PATRICK’S DAY!

In the fourth century, Ireland’s patron saint was sold into slavery.  After six years as a cowherd he escaped to France, where he dreamed that the people of his country were summoning him back.  On his return to Ireland he traveled widely, founding hundreds of churches and schools and convincing people to become Christians.  He used the three-leaf shamrock to explain the Holy trinity – the idea that God the Father, Jesus the Son, and the Holy Spirit are one.  On this day Irish people the world over celebrate by wearing a shamrock and, often, having a parade. –from The Book of Holidays Around the World.

March 17, 1824:  Montreal hosts its first St. Patrick’s Day parade.

Montreal was almost a quarter Irish in 1824 when its St. Patrick’s Day parade – one of the oldest in the world – was founded….Today, the parade is one of the biggest parties of the year in Montreal (almost 40 per cent of francophone Quebeckers have some Irish roots), but it has fallen on hard times.  Amid rising costs and waning sponsorship, organizers are asking for donations.  The parade survived 192 years, through the Rebellions of 1837, Fenian raids, the assassination of Thomas D’Arcy McGee and two world wars.  It seems likely to survive this, too.  –Les Perreaux, Globe & Mail.

On March 17^th, 1912, Captain Robert Falcon Scott wrote in his Diary from Antarctic:

Tragedy all along the line.  At lunch, the day before yesterday, poor Titus Oates said he couldn’t go on; he proposed we should leave him in his sleeping-bag.  That we could not do, but induced him too come on, on the afternoon march.  In spite of its awful nature for him he struggled on and we made a few miles.  At night he was worse and we knew the end had come.

  Should this be found I want these facts recorded.  Oates’s last thoughts were of his mother, but immediately before he took pride in thinking that his regiment would be pleased with the bold way in which he met his death.  We can testify to his bravery.  He has borne intense suffering for weeks without complaint, and to the very last was able and willing to discuss outside subjects.  He did not – would not – give up hope to the very end.  He was  a brave soul.  This was the end.  He slept through the night before last, hoping not to wake; but he woke in the morning – yesterday.  It was blowing a blizzard.  He said, “I  am just going outside and may be some time.”  He went out into the blizzard and we have not seen him since…

  We knew that poor Oates was walking to his death, but though we tried to dissuade him, we knew it was the act of a brave man and an English gentleman.  We all hope to meet the end with a similar spirit, and assuredly the end is not far.

  I can only write at lunch and then only occasionally.  The cold is intense, minus 40° at midday.  My companions are unendingly cheerful, but wer are all on the verge of serious frostbites, and though we constantly talk of fetching through I don’t think any one of us believes it in his heart.

PHOTOS OF THE DAY

Sew On Target, ridden by Brendan Powell, Niceonefrankie, ridden by Charlie Deutsch, and Kings Palace, ridden by Tom Scudamore, race during the 4.10 Brown Advisory & Merriebelle Stable Plate during the Cheltenham Festival at Cheltenham Racecourse in England Thursday. Paul Childs/Action Images/Reuters

Sailboats form a line in Cagnes Sur Mer, France, Thursday. Eric Gaillard/Reuters

Caoimhe Cooburn-Gray poses for a picture on St. Patrick’s day in Dublin, Ireland, Thursday. Clodagh Kilcoyne/Reuters

Market Closes for March 17^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Jiayue Huang

     (Bloomberg) — Canadian stocks rose to the highest level since December as commodity shares jumped after the weakening U.S. dollar boosted prices of resources from crude to copper.

     The Standard & Poor’s/TSX Composite Index climbed 143.17 points, or 1.1 percent to 13,621.30 at 4 p.m. in Toronto, as eight of the 10 main industries rose. The benchmark gauge has gained 4.7 percent this year, rebounding from a 2 1/2 year low in January to lead gains among developed markets tracked by Bloomberg.

     Canada’s resource-rich index is benefiting from a surge in prices for commodities, allowing it to post returns ahead of the U.S, Germany and U.K. Raw-materials producers have surged 36 percent after reaching a 10-a-half-year low on Jan. 19. Energy companies advanced 28 percent from a January nadir that was the lowest since 2004.

     The Canadian benchmark index is now trading at 21.7 times earnings, roughly 17 percent more expensive than the valuation of the U.S. equity benchmark, the Standard and Poor’s 500 Index, data compiled by Bloomberg show.

     Canadian equities got a boost from a U.S. dollar, which has fallen to the lowest level since June. That makes commodities denominated in the currency more attractive, boosting their prices. The greenback slumped after the U.S. Federal Reserve signaled that it would slow down the projected path of interest- rate increases.

     Financial stocks contributed the most to the rally as Canaccord Genuity Group Inc. surged 16 percent for its one-day gain since December 2008.

     Energy companies rose 1.6 percent to the highest level since November as crude prices topped $40 a barrel in New York. TransCanada Corp. advanced 2.6 percent after the company said it will buy Columbia Pipeline Group Inc. for $10.2 billion to expand its reach in the U.S. natural gas market.

     Industrial companies advanced the most among 10 main industries. Bombardier Inc. rose the most in a week after a government official said the Canadian government will ultimately help the struggling jetmaker. Air Canada also gained 5.7 percent.

     Health-care stocks tumbled the lowest level since November 2011, dragged lower by a decrease in Valeant Pharmaceuticals International Inc. Valeant, briefly the largest company in Canada by market capitalization last year, has lost more than three-quarters of its value from an August peak as regulators and investors have scrutinized its business practices after the Quebec-based drugmaker cut its 2016 forecast earlier this week. The company’s stock has plunged 58 percent in four days.

US

By Dani Burger

     (Bloomberg) — The Dow Jones Industrial Average erased its 2016 losses, as a weaker dollar spurred a rally in commodity producers and industrial shares that spread to the broader U.S. stock market.

     Equities pushed to the highest levels since the end of last year as a gamut of companies that benefit from a lower U.S. currency, from General Electric Co. to Coca-Cola Co., surged. A scaled-back pace of interest-rate increases from the Federal Reserve sent the dollar spiraling lower, helping the Dow extend a rebound of more than 11 percent from a two-year low reached last month.

     The Standard & Poor’s 500 Index rose 0.7 percent to 2,040.59 at 4 p.m. in New York, near its break-even level for the year. The Dow added 155.73 points, or 0.9 percent, to 17,481.49, wiping out a 2016 loss that reached as much as 10 percent. The Nasdaq Composite Index rose 0.2 percent, with an increase capped by the slide in biotechnology companies. About 8.2 billion shares traded hands on U.S. exchanges, 6 percent below the 2016 average.

     “Being back to positive does help to a degree,” said Peter Jankovskis, who helps oversee $1.9 billion as co-chief investment officer of Lisle, Illinois-based OakBrook Investments. “Some of the selling that we had through January and February was definitely overdone, but the fact that the Fed remains reasonably confident in the U.S. economy and is keeping an eye on overseas conditions, that’s given some reassurance to investors.”

     A five-week rally has eradicated declines in the Dow and nearly in the S&P 500 that were fed by concerns a slowdown in China would spread, worries that were intensified by a deepening rout in oil and other commodity prices. Energy, raw-material shares and banks have led the rebound as crude recovered, lifting sentiment on lenders amid reduced anxiety about the solvency of some energy producers.

     Caterpillar Inc. gained 2.1 Thursday with commodity shares, even after cutting its first-quarter outlook amid speculation the worst is behind the company. FedEx Corp. jumped nearly 12 percent after raising the bottom of its full-year earnings forecast range. Boeing Co. gained 2.5 percent to a two-month high. Health-care shares sank for a fourth session, the longest since January.

     The Bloomberg Dollar Spot Index fell to its lowest since June after the Fed yesterday signaled that borrowing costs won’t rise as fast as officials previously forecast, citing the potential impact from weaker global growth and financial-market turmoil on the U.S. economy. Caterpillar, the biggest maker of construction and mining machinery, bears out that concern with its lower profit outlook as oil drillers cut billions in costs to weather a rout in commodities amid tepid global demand.

     Still, the lower dollar makes U.S. multinational companies more competitive overseas, a potential boost to lagging profits while the currency’s weakness also bolsters investor demand for commodities priced in dollars. The Bloomberg Commodity Index rose to a three-month high. The raw-material and industrial groups were the two strongest performers in the S&P 500 Thursday, with the latter group reaching an eight-month high.

     The Fed meeting was the third major central-bank event in a week, as policy makers continue to signal their willingness to buttress global growth. The European Central Bank unleashed an unprecedented stimulus package last week, while the Bank of Japan on Tuesday held off from adding more to its record stimulus to assess the impact of negative interest rates. The Bank of England today kept its key interest rate at a record low.

     Traders’ expectations for Fed rate increases this year retreated after rising during the past month amid better U.S. data, higher oil prices and a rebound in equities. Odds for a June boost to borrowing costs are at 37 percent, compared with about 54 percent before the Fed’s statement and outlook.

     The S&P 500 has risen nearly 12 percent since its February low, while briefly erasing its 2016 drop. The benchmark is now about 4 percent below a record set last May.                       

     The Chicago Board Options Exchange Volatility Index fell 3.7 percent Thursday to 14.44, a four-month low. The measure of market turbulence known as the VIX is on track for its longest streak of weekly declines in four years.

     While central banks are focused on addressing slower growth abroad, U.S. data has shown a resilience against the overseas weakness. A report today showed fewer Americans than forecast filed applications for unemployment benefits last week, illustrating the Fed’s view of a stronger labor market. Also, gauge on manufacturing in the Philadelphia area rose more than economists forecast.

     Nine of the S&P 500’s 10 main industries increased today, with raw-materials and industrial shares rising at least 2 percent. The health-care group lost 1.1 percent as drugmakers continued to slide and consumer discretionary shares were little changed.

     “It’s more broad-based than a commodity thing,” said Brian Frank, portfolio manager and co-founder at Frank Capital Partners LLC. “What I’m seeing is that it’s more corporate- buyback driven, with the quiet period from earnings season over. It’s not fundamental-based, but more corporate flows are coming into the market here, and that’s why it’s so broad.”

     Owens-Illinois Inc. and Freeport-McMoRan Inc. increased more than 6.6 percent as the strongest performers in raw- materials, with the group reaching the highest level since Dec. 4. Chemical maker LyondellBasell Industries NV added 2.6 percent, reversing its losses this year. The group has added 21 percent since reaching a 21-month low in January.

     Industrial companies in the benchmark reached the highest since Nov. 23, propelled by FedEx’s biggest gain since 1993. General Electric Co. climbed 2.6 percent to erase its 2016 loss, and Emerson Electric Co. added 6.4 percent for its strongest one-day increase since 2011.

     The Dow Jones Transportation Average extended Wednesday’s rally, advancing 3 percent to its highest since Dec. 2, boosted by FedEx’s jump. Union Pacific Corp. and Ryder System Inc. added more than 3.4 percent to three-month highs. The index erased its losses for the year earlier this month, and sits 20 percent above its January low.

     As oil surged above $40 a barrel in New York for the first time since December, energy-related companies rose 1.4 percent. The group has rallied nearly 22 percent from a five-year low in January. Chesapeake Energy Corp. added 9.1 percent. Devon Energy Corp. and Diamond Offshore Drilling Inc. both advanced more than 4.5 percent.

     “The oil market recovering will continue to feed a risk-on trade,” said Tony Bedikian, Boston-based managing director of global markets at Citizens Bank. “It’s historically a sign of some potential for global recovery.”

     Mylan NV and Mallinckrodt Plc tumbled more than 4 percent as health-care shares extended their longest selloff in two months. The group is down 3.3 percent this week, the only loser among the S&P 500’s 10 main industries during the period.

Have a wonderful evening everyone.

Be magnificent!

Knowledge is the annihilation of the separation between me and the other.

Swami Prajnanpad

As ever,
 

Carolann

Strong convictions precede great actions.

     -James Freeman Clarke, 1810-1888

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