October 23, 2015 Newsletter

Dear Friends,

Tangents:

Tomorrow, October 24^th is United Nations Charter Day.  From The Book of Holidays Around the World:

Before World War II ended, people all over the world believed that there should be an international peacekeeping organization that could prevent future wars.  In October 1943, the foreign ministers of Great Britain, the Soviet Union, and the United States met in Moscow to discuss this goal.  In the next year other nations joined the deliberation, and on October 24, 1945, the United Nations was born.  One hundred and ninety-one nations now send representatives to the UN’s headquarters in New York City.

“…to reaffirm faith in fundamental human rights, in the dignity and worth of the human person, in the equal rights of men and women an of nations large and small, and….to practice tolerance and live together in peace with one another as good neighbours..”

United Nations would be a good idea but the goal has proven still to be elusive.

Tomorrow is also FOOD DAY.  Check out the short documentary Food for Thought, Food for Life at foodforthoughtfilm.com. 

PHOTOS OF THE DAY

A visitor to Sydney’s 19th annual Sculptures by the Sea exhibition poses for a friend’s camera whilst standing on the cast concrete sculpture ‘Open’ by American artist Peter Lundberg, Friday. Sydney’s coastal walk between Bondi and Tamarama has been transformed into a temporary sculpture park featuring over 100 sculptures from Australian and international artists, billed as the largest free sculpture exhibition in the world. Jason Reed/Reuters

Singapore volunteers perform the ‘Human Net’ choreographed by Spanish performance troupe La Fura dels Baus, suspended over the Singapore River, during the opening of the Singapore River Festival on Friday. Edgar Su/Reuters

Market Closes for October 23^rd, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

Eric Lam

     (Bloomberg) — Canadian stocks joined a global equities rally sparked by optimism central-bank stimulus will jumpstart growth.

     The nation’s benchmark index rose to a two-week high, as Valeant Pharmaceuticals International Inc. halted a four-day rout. Canada’s largest lenders contributed the most to gains, while materials producers also advanced.

     Central banks are reasserting dominance over the global financial markets, sparking demand for risk assets, as China’s central bank cut its benchmark lending rate a day after the European Central Bank signaled it will consider bolstering a bond-buying program before the end of the year. Canada’s central bank held rates steady this week.

     The Standard & Poor’s/TSX Composite Index rose 75.55 points, or 0.5 percent, to 13,953.66 at 4 p.m. in Toronto. The gauge posted a 0.8 percent gain in the week. It’s extended an October rally to 4.9 percent, on pace for the biggest monthly increase since 2011. 

     China, Canada’s second-largest trading partner after the U.S., is determined to meet its 2015 growth target of about 7 percent in the face of deflationary pressures, overcapacity and tepid global demand. The ECB said it will increase its bond purchases to stimulate growth if needed.

     Materials producers in the Canadian benchmark advanced 2.4 percent as a group, after the Chinese stimulus fueled bets that demand for resources will increase. Energy shares slid with the price of crude capping the biggest weekly loss since August in New York.

     Health-care shares surged 5.8 percent to trim the group’s biggest weekly loss on record to 31 percent. Laval, Quebec-based drugmaker Valeant rebounded 6 percent, snapping a four-day slump that wiped out 36 percent amid intense investor scrutiny over its pricing practices and relationships with specialty pharmacies. Concordia Healthcare Corp. rallied 22 percent as the smaller drugmaker surged 43 percent in two days to erase a weekly loss.

     Valeant said Thursday it will hold a conference call on Oct. 26 to discuss the claims against the company. Quebec’s Autorite des Marches Financiers said in an e-mailed statement Thursday allegations about the company are “worrisome” and it is checking to see if they ran afoul of any regulations. 

US

By Anna-Louise Jackson

     (Bloomberg) — Central-bank stimulus and strong earnings from the largest technology companies combined to give U.S. stocks their fourth straight weekly gain and propel the Standard & Poor’s 500 toward its best month since 2011.

     The S&P 500 has jumped 11 percent from its summer low, with the surge in October led by commodities producers and technology shares, the very groups that fueled the August selloff. The gains put U.S. equities back in the black for the first time since the correction, and left the benchmark index just 2.6 percent from its all-time high.

     “Stocks are back,” said Robert Pavlik, who helps oversee $9.1 billion as chief market strategist at Boston Private Wealth. “We’re back on track as far as a cheap money, quantitative easing, risk-on trade is concerned.”

     The S&P 500 rallied 2.1 percent in the five days to 2,075.15, for a fourth weekly gain that is the longest streak of the year. The gauge closed at the highest since Aug. 19. The Nasdaq 100 Index surged 4.2 percent for its best week since July.

     Equities got a boost during the week from central banks. On Friday, the People’s Bank of China cut interest rates and banks’ reserve requirements to support a slowing economy. That announcement came a day after the European Central Bank signaled it will bolster stimulus if needed.

     Meanwhile, the earnings season suddenly came to life. More than 100 companies in the S&P 500 reported for the week, initially providing mixed messages until results from three tech giants late Thursday sparked a broad rally. Microsoft Corp., Google parent Alphabet Inc. and Amazon.com Inc. added more than $80 billion in combined market value the next day as quarterly profit topped estimates. A group of tech stocks in the gauge surged 4.6 percent in the week to a 15-year high.

     The combination of earnings growth and central bank stimulus — two of the biggest supports for equities during the 6 and 1/2 year bull market — provided an accelerant to stocks in the midst of recovering from the first correction since 2011. All 10 of the major groups in the S&P 500 have rallied since Aug. 25, led by gains of more than 16 percent for technology and energy stocks.

     With the summer selloff fading away, volatility has also diminished. The Chicago Board Options Exchange Volatility Index has tumbled more than 60 percent after spiking to the highest in almost four years during the S&P 500’s summer swoon. The volatility measure has been below 20 for 15 straight days. Prior to that, it traded above that level for 30 sessions, the longest such streak since January 2012.

     “There’s likely to be continued policy support from central banks around the world and the headwinds, particularly the slowdown in China’s growth, may be behind us. Investors can take some comfort in that,” said Brian Jacobsen, who helps oversee $250 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “On top of that, earnings that came out, particularly from the Holy Trinity of Big Tech, were great. There were a lot of things that lined up nicely for us this week.”

     Not everything went smoothly during the week. Valeant Pharmaceuticals International Inc. took the market on a wild ride Wednesday, plunging as much as 40 percent after a stock- commentary site run by short seller Andrew Left questioned the company’s sales practices. Valeant called the accusations “erroneous” and denied the report. Other health-care companies took a battering, with Endo International Plc and Tenet Healthcare Corp. falling more than 16 percent for the week.

     And while the S&P is up 8.1 percent in October, on track for the best month since 2011, it has yet to recoup all of its losses from August, let alone reach its record from May. Meanwhile, the Russell 2000 Index of small-cap stocks is 10 percent below its 2015 peak. 

     There’s the possibility of further choppiness, which means it’s probably not “onward and upward from here,” according to Leo Grohowski of BNY Mellon Wealth Management in New York, especially with the Federal Reserve still debating the timing for higher interest rates.

     “It’s been sort of a relief rally, rather than an indication of renewed optimism,” said Grohowski, who helps manage more than $183 billion in client assets as chief investment officer of BNY Mellon Wealth Management. “My growing concern is the equity market participants here in the U.S. are still too complacent around December and there being a less than a 50-50 chance of a rate liftoff.”

     The Fed is scheduled to meet in the coming week and the probability of a boost to interest rates before January is 36 percent. Mixed economic data and volatile financial markets kept the Fed from tightening last month.

     U.S. economic reports were generally positive this week. Robust housing reports suggested U.S. growth may be getting support from the real-estate market. Meanwhile, jobless claims fell near the lowest level in four decades, though Americans’ expectations for the economy deteriorated to a 13-month low in October.

     On the whole, it was a “rewarding week” as the market returned to positive territory for the year, said Grohowski.

Have a wonderful weekend everyone!

Be magnificent!

The first condition of humaneness is a little humility and a little diffidence

about the correctness of one’s conduct and a little receptiveness.

Mahatma Gandhi

As ever,

Carolann

Make the best use of what is in your power, and take the rest as it happens.

                                                                       -Epicetus, 55 AD-135

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