September 1, 2015 Newsletter

Dear Friends,

Tangents:

September 1, 1939: World War ll begins.  I have just finished reading an amazing book, the events of which take place during World War ll.  It is entitled “All the Light We Cannot See” by Anthony Doer.  It won the 2015 Pulitzer Prize for fiction and the 2015 Andrew Carnegie Medal for Fiction.  I highly recommend it.

“A novel to live in, learn from, and feel bereft over when the last page is turned.” — Booklist

“Tackling questions of survival, endurance and moral obligations during wartime, the book is as precise and artful and ingenious as the puzzle boxes the heroine’s locksmith father builds for her. Impressively, it is also a vastly entertaining feat of storytelling.” –New York Times Book Review

PHOTOS OF THE DAY

A double rainbow is seen above a row of terrace houses in Clapham, south London, Britain, Tuesday. The second rainbow, above the main arc has the sequence of its colors reversed, with red on the inner side of the bow. Dylan Martinez/Reuters

An Indian villager rescues his sheep on a makeshift raft at Balimukh village, about 43 miles east of Gauhati, India, Tuesday. Monsoon floods have inundated hundreds of villages across the northeast Indian state of Assam, killing several people and forcing some 800,000 people to leave their homes.Anupam Nath/AP

Market Closes for September 1^st, 2015

International Markets

Bonds

Currencies

Commodities

Market Commentary:

Canada

By Eric Lam

     (Bloomberg) — Canadian equities tumbled, after the worst month in nearly a year, as the economic malaise that has gripped stock markets around the world continued into September.

     The Standard & Poor’s/TSX Composite Index slumped 2.7 percent as data showed Canada’s gross domestic product shrank again in the second quarter, meeting the technical definition of a recession. The report followed disappointing China manufacturing data that weighed on global stocks.

     The S&P/TSX sank 377.22 points to 13,481.90 at 4 p.m. in Toronto. Canadian stocks lost as much as 10 percent in August before rebounding 6.2 percent in four days. The equity gauge has dropped 7.9 percent in 2015.

     Gross domestic product in Canada declined at a 0.5 percent annualized pace from April to June, Statistics Canada said Tuesday in Ottawa. The agency also revised its first-quarter contraction deeper, to 0.8 percent from 0.6 percent. Economists had estimated a 1 percent decline in the second quarter.

     “With exports still struggling and business investment falling in response to the fallout in the energy sector, hopes for a sustained rebound beginning in the second half of the year look misplaced,” David Madani, an economist at Capital Economics in Toronto, said in a report to clients. “The economy is still struggling to deal with low oil prices.”

     Equities tumbled around the world as investors digested the latest news from China. The S&P 500 sank 3 percent in New York as the MSCI All-Country World Index retreated 2.7 percent.                      

     China’s official factory gauge fell to the lowest level in three years as monetary easing failed to revive the country’s flagging economy. The benchmark Canadian equities index fell 4.2 percent in August as concerns mount that China’s policy makers won’t be able to prop up its markets at the same time Federal Reserve officials signaled they’re preparing to raise interest rates.

     The resource-rich S&P/TSX has been one of the worst- performing developed markets in the world this year as crude plunged. Oil futures slipped 7.7 percent in New York, after the biggest three-day rally in 25 years, as speculation faded OPEC may coordinate supply restraint with other nations. Oil surged 27 percent in the three days through Monday.

     Energy stocks had the biggest declines among 10 groups in the benchmark index today, sliding 4.2 percent. First Quantum Minerals Ltd. dropped 11 percent as copper prices have fallen in New York for four straight months, the worst streak since 2008.

     Penn West Petroleum Ltd. sank 17 percent after the Calgary oil producer said it will scrap its dividend, fire 35 percent of its work force and look to sell more assets. Penn West is the third-worst performing stock in the S&P/TSX this year with a 65 percent decline.

     Bombardier Inc., the worst-performer in the gauge this year, dropped 9.3 percent. Royal Bank of Canada and Bank of Nova Scotia sank at least 2.7 percent to lead the nation’s largest lenders lower.

     A volatility gauge for 60 of the largest, most liquid stocks in Canada jumped 12 percent. The measure added 78 percent in August, its biggest monthly climb in data back to 2009.

US

By Oliver Renick

     (Bloomberg) — U.S. stocks joined a worldwide selloff, after equities’ worst month in more than three years, amid continuing concerns that China’s slowdown will weigh on the global economy.

     Energy shares fell for the first time in five sessions as oil retreated after the commodity’s strongest three-day rally since 1990. Exxon Mobil Corp. and ConocoPhillips slumped more than 2.8 percent. Banks were among the hardest hit, with Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. losing at least 4.1 percent. Apple Inc. and Microsoft Corp. sank more than 3.9 percent to drag down technology shares. Copper producer Freeport-McMoRan Inc. dropped 8.2 percent.

     The Standard & Poor’s 500 Index slid 3 percent to 1,913.85 at 4 p.m. in New York, the third-worst drop this year. It’s a sour start to September, historically the worst month of the year with the equity gauge falling 1.1 percent on average going back to 1927, according to data compiled by Bloomberg. The Dow Jones Industrial Average sank 469.68 points, or 2.8 percent, to 16,058.35. The Nasdaq Composite Index lost 2.9 percent.

     “The problem is, as much as China is the catalyst for this, it’s also that we’re seeing weakness in fundamentals here,” said Matt Maley, an equity strategist at Miller Tabak & Co LLC in New York. “A lot of company earnings were hurt by China in the second quarter and it’s only gotten worse. People are losing confidence with the whole situation there breaking down, not just in the stock market but in data as well.”

     Equities dropped in Asia, with the Shanghai Composite Index slumping as much as 4.8 percent, after manufacturing reports pointed to a deepening Chinese economic slowdown.                     

     International Monetary Fund Managing Director Christine Lagarde said Tuesday the global expansion outlook is worse than the lender anticipated less than two months ago. “This reflects two forces: a weaker than expected recovery in advanced economies, and a further slowdown in emerging economies, especially in Latin America,” Lagarde said in a speech in Jakarta.

     A report today showed U.S. factories expanded in August at the slowest pace since May 2013 as anemic demand from emerging markets such as China translated into leaner factory order books. A measure of exports matched the weakest reading since April 2009. The weak manufacturing data surface ahead of the Federal Reserve’s September policy meeting in which they will debate whether the economy is strong enough to withstand an increase in interest rates in the face of fragile overseas economies.

     Remarks by Fed Vice Chairman Stanley Fischer last week suggested the central bank hasn’t ruled out raising rates when policy makers gather on Sept. 16-17. That has heightened concerns that the Fed may increase rates even as growth slows around the world. Fed Bank of Boston President Eric Rosengren said in a speech today that uncertainty over inflation and global growth justify a modest pace of rate increases, regardless of when the central bank begins tightening.

     Traders are now pricing in a 30 percent chance that the Fed will act this month, down from 38 percent yesterday. Attention will focus this week on the government’s August jobs report, due Friday, as the last major data point before the Fed’s meeting.

     “Markets may have overemphasized China’s impact, but markets are also in relatively bad shape and we’re getting more negative technical signals,” said Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich. “It’s a close call for the Fed and as long as markets are in turbulence, I don’t think it will raise rates. If the markets remain too turbulent, they will postpone to October.”

     The S&P 500 ended down 6.3 percent in August as China’s currency devaluation spurred concern over global growth, erasing more than $5.7 trillion in equity market values worldwide, while a measure of volatility surged the most on record. The S&P 500 plunged the most since 2011 and entered a correction last week, only to then rally more than 6 percent over two days. The U.S. benchmark index closed Tuesday 10 percent below its all-time high set in May.

     The Chicago Board Options Exchange Volatility Index rose 10 percent Tuesday to 31.40. The measure of market turbulence known as the VIX had a record monthly jump in August,up 135 percent. About 9 billion shares traded hands on U.S. exchanges today, 28 percent above the three-month average.

     A handful of stocks that had driven much of the S&P 500’s 2015 gains before the August selloff came under pressure Tuesday. Facebook Inc., Amazon.com Inc., Apple, Netflix Inc. and Google Inc. — which had come to be known as the Fab Five — were all down at least 2.4 percent. Among other technology shares, semiconductor makers Avago Technologies Ltd. and Skyworks Solutions Inc. fell more than 4.9 percent.

     All 10 of the S&P 500’s main groups declined today, with energy, financial, technology and raw-material companies all falling more than 3 percent. Energy and financials led the benchmark’s 3.9 percent selloff on Aug. 24, which was its biggest drop in four years.

     Energy shares halted a four-day, 12 percent rally after crude fell the most in two months. Chevron Corp. lost 3.5 percent, while Murphy Oil Corp., Consol Energy Inc. and Devon Energy Inc. retreated more than 5.4 percent.

     Citigroup and Wells Fargo & Co. fell more than 4.3 percent to pace declines among financial companies, where all 88 stocks in the group retreated. E*Trade Financial Corp. and Lincoln National Corp. decreased at least 4.9 percent. The KBW Bank Index sank 4.3 percent, its second-biggest drop this year, with 22 of the gauge’s 24 members down at least 3 percent.

     Dollar Tree Inc. slid 8.7 percent, the most in the S&P 500 and its biggest drop since February 2009. The discount retailer forecast sales that trailed analysts’ estimates, as it works to integrate its acquisition of Family Dollar Stores Inc.

     Netflix lost 8 percent for its biggest drop this year. Along with Dollar Tree, the online video-streaming service led the benchmark’s consumer discretionary group lower. Netflix shares are still up 117 percent this year. Wynn Resorts Ltd. and Whirlpool Corp. decreased more than 4.7 percent Tuesday.

Have a wonderful evening everyone.

Be magnificent!

Ever tell  yourself, I am He.

These words that will burn up the dross that is in the mind, words that will bring out the tremendous energy

which is within you already, the infinite power which is sleeping in your heart.

Swami Vivekananda

As ever,

Carolann

A yawn is a silent shout.

-G.K. Chesterton, 1874-1936

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