November 3, 2016 Newsletter

Dear Friends,

Tangents:
On Nov. 3, 1936, President Franklin D. Roosevelt was re-elected in a landslide over Republican Alfred M. ”Alf” Landon.
November 3, 1817 – The Bank of Montréal opens its first branch and trades its first shares.
November 3, 2016, the Chicago Cubs beat the Cleveland Indians 8-7 to win the World Series, ending the team’s 108-year drought.

NOVEMBER
The last red berries shrivel.  Night comes early, dawn late.  The sun is weaker.  Ice is on the birdbath, frost on the car.  Perhaps it is already snowing.  Certainly, it’s damp and raw.  Rain is forecast.  Now is the time to act, to begin.  As Ishmael says in Moby Dick, “whenever it is a damp, drizzly November in my soul….I account it high time to get to sea as soon as I can.”  He means it’s time for human deeds.  Without our contribution, nothing will happen, life will have no meaning without our experience, the world cannot evolve, life on earth cannot become more abundant.  “We have it in our power to begin the world over again,”  said Tom Paine.  “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible,”  said St. Francis of Assisi.  All it takes is patience, grace, intention, and the right moment. –Cosmo Doogood’s Urban Almanac.
   Venus crosses the star-rich area of Sagittarius this month, reaching its greatest elongation; Mercury also reaches its greatest elongation.
November 6^th: Daylight Savings Time Ends
November 11^th: Remembrance Day
November 14^th: Full moon
November 29^th: New Moon
PHOTOS OF THE DAY

The Chicago Cubs celebrate after winning Game 7 of the Major League Baseball World Series against the Cleveland Indians on Thursday in Cleveland. The Cubs won 8-7 in 10 innings to win the series 4-3. Gene J. Puskar/AP

Fallen leaves cover a BMW on a rainy autumn day in Belgrade, Serbia, on Thursday. Marko Djurica/Reuters
Market Closes for November 2^nd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Number of the Day
38.08%
The percentage of earnings paid out as dividends by U.S. companies over the past 12 months, according to data provider FactSet. That’s just a fraction below the 38.19% reached during the height of the financial crisis, when the ratio’s rise was due to a steep fall in earnings.
Canada
By John Hyland
     (Bloomberg) — Canadian stocks erased gains to finish lower with global equities as investor anxiety rises ahead of Tuesday’s U.S. presidential election. Crude slumped to a five- week low, dragging down energy shares, while airlines slid amid speculation competition will increase.
     The S&P/TSX Composite Index fell 0.1 percent to 14,583.42 at 4 p.m. in Toronto, erasing a gain of as much as 0.5 percent. The S&P 500 Index slid for an eighth day and the CBOE Volatility Index had an equal number of gains as investors pulled back on riskier assets amid polls showing the U.S. election tightening.
     The election’s outcome on Canadian equities is not clear, though the U.S. is Canada’s largest trading partner and Republican Donald Trump has suggested he would amend or scrap the North American Free Trade Agreement if he prevails Tuesday. Democrat Hillary Clinton has indicated she would crack down on drug pricing, possibly hurting the fortunes of health-care companies.
     Eight of 11 groups in the benchmark index for Canadian equities retreated Thursday. Airlines led industrials lower as Air Canada dropped the most in three months after the federal transport minister signaled his intention to raise foreign ownership limits for carriers, a move that may create more competition for the country’s airlines. WestJet Airlines Ltd. also tumbled.
     Energy shares slipped as crude oil dropped to a five-week low. Enbridge Inc. fell 1.9 percent after reporting an unexpected loss in the third quarter, while Encana Corp. rose the most in three months after reporting a surprise profit.
     Valeant Pharmaceuticals International Inc. led the health- care sector lower, falling 8.8 percent. The shares fell more than 9 percent yesterday on a marketing lawsuit and reports that it’s exploring a sale of some eye-surgery assets worth $2.5 billion.
     Canadian stocks are now 15 percent more expensive than their peers in the S&P 500 Index. The S&P/TSX trades at 22.2 times earnings, compared with 19.6 for the S&P 500 Index. The S&P/TSX is the top performer among developed equity markets tracked by Bloomberg in 2016.
     Raw-materials producers advanced after snapping a four-day rally. Gains were once again centered around gold miners, with Kinross Gold surging 8.9 percent to its highest level since July 2016 after its CEO vowed to continue a disciplined approach to M&A. Barrick Gold Corp. added 1.2 percent.
     Financial stocks rose for the first time in three days as the election angst showed signs of abating. Fairfax Financial Holdings Ltd. climbed 2.9 percent, its best since August. Manulife Financial Corp. advanced 0.9 percent, while Royal Bank of Canada and Bank of Nova Scotia gained to propel the group higher.
US
By Rebecca Spalding and Joseph Ciolli
     (Bloomberg) — The 2016 election has confounded pundits, upended precedent and now it’s spurring unusual patterns in the U.S. equity market. To wit: stocks almost always rise in the days before the country picks a president. This year, they’re falling.
     The S&P 500 Index has advanced in the five days before the vote in 20 of the past 22 cycles, according to data compiled by Bloomberg and Bespoke Investment Group LLC. While the gauge has climbed an average 1.9 percent in the run-up to elections going back to 1928, it’s down 1.8 percent since Monday, with two market days left until polls open Nov. 8. The index fell 0.4 percent Thursday, to 2,088.66 at 4 p.m. in New York., slumping to the lowest since July 5 as losses accelerated in the late afternoon.
     Blame it on narrowing polls and the experience of traders during the last political drama they were asked to navigate, Britain’s vote to secede from the European Union, which proved costly to anyone going all-in on odds makers. A tightening race has sent the S&P 500 down eight straight days, the longest slump since 2008, and pushed the CBOE Volatility Index to its lengthiest streak of gains on record.
     “It all has to do with certainty and uncertainty, that’s what’s driving markets: the headlines and politics are the biggest headlines,” said Ernie Cecilia, chief investment officer at Bryn Mawr Trust, which oversees $9.6 billion in Bryn Mawr, Pennsylvania. “The recent decline has more to do with the top of the ticket polls getting tighter. The market hadn’t factored in the possibility of a Donald Trump presidency.”
     Just four months removed from the U.K.’s shock decision to leave the European Union in an outcome not predicted by betting markets, anxiety levels have spiked in the final week of an election season marked by twists that have seen Democrat Hillary Clinton’s once dominant lead over Republican Donald Trump wither in recent polls. The Brexit shock sent the S&P 500 tumbling 5.3 percent in two days, while the VIX spiked the most in five years.                     
     The hard-to-predict election is adding anxiety to a market that already has plenty to fret about. Valuations remain their highest since 2009 as central banks around the world have kept monetary policies loose. U.S. companies today trade at 77 percent higher valuations on a price-earnings basis than they did when the 7 1/2-year bull market began.
     Even as valuations have grown, earnings haven’t kept pace. Corporate profits have contracted for five quarters in a row, the longest run since the financial crisis. The stretched equity prices and sluggish earnings have made some traders skittish. Investors have pulled $100 billion from mutual and exchange traded funds that track U.S. stocks since January, an almost unprecedented rate.
     While forecasts predict the earnings recession is set to end this quarter as most S&P 500 companies that have reported thus far have beaten estimates, the good news for corporate profits hasn’t been enough to shake investors’ election anxiety. Trading in options that protect against a market decline reached its highest level since April last week, ahead of Wednesday’s FOMC meeting where officials signaled the Federal Reserve will likely raise interest rates in December.                    
     “Markets are always adjusting and they’re handicapping in the short run what the outcome will be,” said Kevin Caron, a Florham Park, New Jersey-based market strategist and portfolio manager who helps oversee $180 billion at Stifel Nicolaus & Co. “Everyone wants to talk about the election but the market is moved by more of the latter points: the outlook for earnings and the outlook for interest rates.”
     Corporate results did little to buoy the market Thursday, with Facebook Inc. suffering the steepest slide since February after executives indicated the company will see slower revenue growth and higher costs. American International Group Inc. dropped the most in four months after posting a profit that was short estimates. Marathon Oil Corp. jumped 11 percent after reporting a smaller-than-predicted loss, while production exceeded forecasts.
     The Nasdaq Biotechnology Index slumped 2.9 percent to a four-month low after people familiar with the matter said U.S. prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion. Endo Pharmaceuticals Plc plunged more than 19 percent, the most in six months.
     Almost 80 percent of S&P 500 companies have reported earnings this season, with 56 percent beating sales expectations and 76 percent topping profit forecasts. Analysts forecast profit for the benchmark’s members will rise 1.6 percent for the period, on pace to end the longest earnings recession since the financial crisis.                      
     The S&P 500 ended below the technically sensitive 2,100 level yesterday for the first time since July 7. The Dow Jones Industrial Average today slipped 28.97 points, or 0.2 percent, to 17,930.67. The Nasdaq Composite Index lost 0.9 percent as Facebook paced a selloff in technology companies, and health- care dropped to an eight-month low. About 7.3 billion shares traded hands on U.S. exchanges, 12 percent more than the three- month average.
     Investors yesterday were unmoved by the Federal Reserve’s widely expected decision to stand pat on interest rates. Policy makers reinforced expectations for a hike in December after saying the argument for higher borrowing costs strengthened further amid accelerating inflation. Traders are pricing in a 78 percent chance the central bank will act next month.
     Ahead of the government’s monthly payrolls report, a reading today showed filings for unemployment benefits unexpectedly rose to the highest level in almost three months. Another measure indicated service industries expanded less than projected in October, consistent with moderate growth in the biggest part of the economy. Data also showed factory orders in September rose more than forecast.

Have a wonderful evening everyone.

Be magnificent! 

Satisfy one’s desires, certainly, but which ones?
And to what extent?
To determine precisely what I want, and how.
Children?  Money?  Glory?  How?
Swami Prajnanpad

As ever,

Carolann

People don’t notice whether it’s winter or summer when they’re happy.
                                                           -Anton Chekhov, 1860-1904

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

Tel: 778.430.5808
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