November 7, 2016 Newsletter

Dear Friends,

Tangents:
On Nov. 7, 1917, Russia’s Bolshevik Revolution took place as forces led by Vladimir Ilyich Lenin overthrew the provisional government of Alexander Kerensky.
Joni Mitchell’s birthday today, b. November 7^th, 1943.

BIG YELLOW TAXI
…Don’t it always seem to go
That you don’t know what you’ve got
‘Til it’s gone
They paved paradise
To put up a parking lot…
PHOTOS OF THE DAY

Russian paratroopers jump through a rainbow from an IL-76 transport plane during a joint Serbian-Russian military training exercise, ‘Slavic Brotherhood,’ in the town of Kovin, Serbia, on Monday. Marko Djurica/Reuters

A delegate from Cook Island attends the opening session of the Climate Conference in Marrakech, Morocco, on Monday. Climate negotiators have started work on implementing the Paris pact on global warming amid uncertainty over how the US election will impact the landmark deal as temperatures and greenhouse gases soar to new heights. Mosa’ab Elshamy/AP

A Hindu devotee holds offerings as she worships the Sun God in the waters of a pond during the religious festival of Chhat Puja in Kolkata, India, on Monday. Rupak De Chowdhuri/Reuters
Market Closes for November 7^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks snapped a four-day slide as global markets rallied as investors speculate Hillary Clinton’s chances of winning the U.S. election have improved a day ahead of the vote.
     The S&P/TSX Composite Index added 1 percent to 14,652.45 at 4 p.m. in Toronto, for the biggest increase in three weeks. The index had lost 1.9 percent over the previous four sessions. The equity benchmark is up 13 percent in 2016, the top performer among developed markets tracked by Bloomberg. Canadian stocks are now 14 percent more expensive than their peers in the S&P 500 Index.
     Equities surged around the world after the FBI decided to stick to its previous view that Clinton’s handling of her e- mails wasn’t a crime. Clinton leads Donald Trump by three percentage points among likely voters, according to the final Bloomberg Politics national poll before Tuesday’s election. Clinton has 44 percent support to Trump’s 41 percent when third- party candidates are included.
     Toronto-Dominion Bank and Bank of Nova Scotia each climbed 1.1 percent to lead a rally in the nation’s largest lenders. Financial services and energy stocks gained at least 1.4 percent as 10 of 11 industries in the S&P/TSX advanced on trading volume 9.3 percent lower than the 30-day average. Raw-materials producers slumped 1.4 percent, the lone laggard, as gold sank the most in a month offsetting gains in copper and steel.
     Suncor Energy Inc. and Encana Corp. rose more than 2.5 percent as crude rebounded to halt a six-day losing streak that was the longest since July. Futures rose 1.9 percent in New York to join the broader market rally. A magnitude 5 earthquake struck near the oil hub at Cushing, prompting some pipeline operators to shut operations as a precaution.
     Concordia International Corp. plummeted 37 percent, extending the lowest levels in more than three years, after third-quarter earnings and revenue fell well short of estimates.
     The struggling drug maker also suspended its forecasts to assess its business under new leadership. Concordia shares have wiped out 95 percent of their value this year.
     Air Canada surged 7.5 percent, the biggest increase in almost six months, after the airline tightened its full-year profit target. Earnings before interest, taxes, depreciation amortization and aircraft rent will probably increase 6 percent to 8 percent this year, the company said. Air Canada had previously forecast 4 percent to 8 percent growth. Air Canada’s earnings also exceeded estimates.

US
By Joseph Ciolli
     (Bloomberg) — The resolution of the FBI’s investigation into Hillary Clinton’s e-mails two days before the presidential election could hardly have come at a worse time for investors betting on equity volatility into the election.
     Relief swept over stock markets Monday after the FBI reiterated Clinton’s controversial handling of her e-mails wasn’t a crime, sending the CBOE Volatility Index tumbling 17 percent. Bets the slump will continue rose to the highest in almost three months relative to wagers on an increase. The S&P 500 Index surged 2.2 percent to 2,131.52 at 4 p.m. in New York, the biggest one-day gain in eight months.
     The latest revelation quelled apprehension over the election’s outcome after Federal Bureau of Investigation Director James Comey said on Oct. 28 the agency was examining new e-mails potentially related to its review of Clinton’s use of a private server. Investors still smarting from being caught wrong-footed after the Brexit vote pushed the VIX up 39 percent last week, extending its longest-ever streak of gains to the highest level since June amid narrowing polls and an increasingly unpredictable election.
     “The end of the investigation lends a little more clarity to the situation,” Bill Schultz, who oversees $1.2 billion as chief investment officer of McQueen, Ball & Associates Inc. in Bethlehem, Pennsylvania, said by phone. “This gets us closer to reducing and possibly eliminating one of the main uncertainties surrounding the election, and you’re seeing that reflected in positioning.”
     Open interest on put contracts for the VIX swelled to 45 percent of the same measure for calls, the most since Aug. 18, according to data compiled by Bloomberg. That’s high relative to the average of 40 percent for the past year.
     The worry last week also pushed the spread between expected and realized volatility into the 99th percentile since 1990, according to Goldman Sachs Group Inc. With the measure that extended, there could be a “VIX collapse if uncertainty declines post-election,” David Kostin, chief U.S. equity strategist at the firm, wrote in a Nov. 4 client note.
     American stocks have shown themselves sensitive to Clinton’s presidential prospects, with futures rising in September during the first debate she was widely considered to have won. The S&P 500 tumbled about 20 points in the 40 minutes after Comey’s initial letter was made public. While the race has been tightening before tomorrow’s vote, Clinton still maintains a narrow lead over Republican rival Donald Trump, according to an average of polls by RealClearPolitics.
     The S&P 500 on Monday halted its longest losing streak since 1980. The Dow Jones Industrial Average soared 371.32 points, or 2.1 percent, to 18,259.60, a four-week high. The Nasdaq Composite Index increased 2.4 percent. Banks, technology companies and drugmakers paced the rebound, with lenders capping their steepest climb since August. JPMorgan Chase & Co. and Microsoft Corp. advanced more than 2.9 percent. About 7.1 billion shares traded hands on U.S. exchanges, 8 percent more than the three-month average.
     “We’ve been down nine straight days as concerns over a potential Trump victory put a lot of caution in the market,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “Some of that is being relieved with the comments from the FBI about the Clinton e-mail investigations. All today guarantees is that there will be more volatility for the rest of the week following tomorrow’s election.”
     The S&P 500 has advanced in the five days before the vote in 20 of the past 22 presidential election cycles, according to data compiled by Bloomberg and Bespoke Investment Group LLC, with an average 1.9 percent climb in the run-up to votes going back to 1928. After today’s 2.2 percent rally, the index rose 0.3 percent over the five sessions before tomorrow’s election.
     Hedge fund manager David Tepper said he’s supporting Clinton for president after initially being open to backing Trump. He said in a CNBC interview on Monday that she will probably be to the right of her party’s platform on economic policy. The head of Appaloosa Management also said he’ll vote for Republican candidates running for the House and Senate.
     “There isn’t certainty she’ll win, but she is gaining some momentum and at least we got one worry out of the way,” said Christian Stocker, a strategist at UniCredit Bank AG in Munich, Germany. “This should last until Wednesday, when markets decide what the next direction is.”
     Speculation on Clinton’s chances also helped boost odds of a Federal Reserve interest-rate increase next month. Data compiled by Bloomberg based on fed funds futures trading show an 80 percent probability of higher borrowing costs by year end, up from 76 percent on Friday.
     The earnings season is drawing to a close, with about 85 percent of S&P 500 companies having reported. Of those, 56 percent beat sales expectations and 76 percent exceeded profit forecasts. Marriott International Inc. and News Corp. are among firms posting results today. Analysts forecast a profit increase of 2.5 percent for the benchmark’s members in the third quarter. If that holds, it will end the longest earnings recession since the financial crisis.
     Among shares moving on earnings news, Sysco Corp., the largest North American food distributor, surged the most in five years after posting first-quarter profit that beat analysts’ estimates.

Have a wonderful evening everyone.

Be magnificent!

As long as the brain, which is so heavily conditioned, is measuring, “the more,” “the better,”
moving psychologically from this to that, it must inevitably bring about a sense of conflict, and this is disorder.
Not only the words more and better, but the feeling, the reaction, of achieving,
gaining – as long as there is this division, duality, there must be conflict.  And out of conflict is disorder.
Krishnamurti

As ever,

Carolann

Absolutely.  If it’s at all possible.
                -Bob Dylan, b. 1941-
(responding to a journalist who asked if he would be attending the December 10^th Nobel Prize dinner in Stockholm)

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
(C): 250.881.0801
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www.carolannsteinhoff.com