September 1, 2016 Newsletter

Dear Friends,

Tangents:

SEPTEMBER
Birthstone: Sapphire
Flower: Aster
Summer wanes, autumn approaches.  Swallows swoop and gather in the sky.  The air smells of fallen apples.  Goldenrod is everywhere.  The sunlight, too, is golden, like the stubble in the fields.  Liquid and tender, now it warms our backs, not our heads.  Amid the late ripeness, nature begins the process of withering and fading away.  At night, a chill is in the air.  Flies die.  Outer growth turns inward and an inner sun replaces the outer one.  Self-consciousness rises, filling us with courage, initiative, and will.  The future lies before us, requiring a sensitive, respectful heart.  Therefore, at the equinox, when the days and nights are again of equal length, we celebrate Michaelmas, the feast of Michael and the Archangels.  As St. Michael overcomes the dragon, we, too, may overcome all that hardens us – our past, our habits, our fixed ways of thinking and feeling – so as to become free to create a truly human, earth-caring, loving future.

Youth is like spring, an over praised season more remarkable for biting winds than genial breezes.
Autumn is the mellower season, and what we lose in flowers we more than gain in fruits. ~Samuel Butler.

On Sept. 1, 1939, World War II began as Nazi Germany invaded Poland.
PHOTOS OF THE DAY

A visitor pauses to look at “The Last Column” in front of the World Trade Center’s original slurry wall at the National September 11 Memorial and Museum in Manhattan, New York, on Thursday. Andrew Kelly/Reuters

Seven-year old cadets listen to their teacher on their first day in school at a cadet lyceum in Kiev, Ukraine on Thursday. Ukraine marks Sept. 1 as Knowledge Day, a traditional launch of the academic year. Efrem Lukatsky/AP
Market Closes for September 1^st, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks rose the most in three weeks, rebounding from the lowest level in almost a month, as raw-materials producers rallied with the price of precious metals as investors cut the odds for higher U.S. interest rates.
     The S&P/TSX Composite Index rose 0.6 percent to 14,683.91 at 4 p.m. in Toronto, reversing a loss of as much as 0.2 percent. The benchmark gauge closed yesterday at a four-week low, but managed to eke out a 0.1 percent increase in August. Trading volume was 25 percent higher than the 30-day average on Thursday.
     Raw-materials producers added 2.4 percent, for the strongest rally since July. The group surged as the dollar erased gains after a weaker-than-forecast reading on U.S. manufacturing in August. That damped wagers on a Federal Reserve interest-rate increase this month. Gold edged higher after capping the first August decline in seven years, ahead of Friday’s U.S. jobs report. Barrick Gold Corp. rallied 4.6 percent, and Silver Wheaton Corp. added 3.3 percent.
     Dollarama Inc. added 4.4 percent, closing at a record after second-quarter earnings and revenue topped estimates, driving a 0.9 percent gain in consumer discretionary stocks. The dollar- store retailer maintained plans to open 60 to 70 net new stores by the fiscal year-end.
     Meanwhile, Canadian Western Bank ended 0.3 percent higher after a whipsaw day, reporting a narrow beat in adjusted earnings. Chief Executive Chris Fowler said in a statement the company will continue to “conservatively manage” exposure to the oil and gas industry in Alberta. All six of Canada’s largest lenders beat analysts’ estimates in the current reporting period. Financial stocks added 0.1 percent Thursday, clawing back earlier losses.
     Energy producers rose 0.2 percent, even as oil tumbled, on track for the biggest weekly decline in eight months. Government data Wednesday showed crude supplies at the highest seasonal level in more than 20 years. Crude futures in New York have slumped 9.3 percent in four days and sank below $44 a barrel.
     The rally in the commodity sector has boosted the Canadian equity benchmark to an almost 13 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. Canadian stocks are more expensive than their U.S. peers, with a price-earnings ratio of 23.3 for the S&P/TSX, opening up a 14 percent premium over the S&P 500 Index.
     The yearlong rally in Canadian equities fizzled in August, capping the narrowest one-month climb since June 2009 as gains in raw-materials producers faltered with gold. The drop cut the group’s rally this year to 49 percent, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 20 percent in 2016, on pace for the strongest in seven years.

US
By Lu Wang
     (Bloomberg) — If you’re a trader who’s been fed up with U.S. stocks doing nothing for weeks, Friday’s payrolls report may be the solution.
     In short, August employment reports are usually bad, and that’s normally bad news for equities. Since 1996, 15 out of 19 releases have trailed economists’ estimates, data compiled by Bloomberg show. When they did, the S&P 500 Index fell an average 0.4 percent, compared with an average increase of 0.1 percent for all payrolls days.
     While a shortfall this time could be framed as bullish, prompting the Federal Reserve to hold off raising interest rates in September, weakness would also undermine confidence that a second-half pickup will stem a decline in corporate profits. The S&P 500 slipped less than a point to 2,170.86 at 4 p.m. in New York, squarely within the same 1.5 percent band it has now occupied for 36 straight days. That’s the tightest trading range since 1964.
     “When the market moves within a narrow range, it’s getting tightly wound and looking for news, and Friday’s number is a big number,” said Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, which manages $7.4 billion. “Because there is a lot of optimism built in, it’s going to be a show-me market.”
     American companies are forecast to have added 180,000 jobs last month, an increase that if matched would be the best initial reading for any August since 1998. The odds of that happening aren’t promising: August ranks No. 1 among all calendar months for the frequency of disappointments. On average, it produced 36,000 fewer jobs than economists predicted in the last two decades.
     Disappointing jobs data hasn’t boded well for stock returns historically. Since 1996, the S&P 500 is flat on average for the days when payrolls reports trail estimates, compared with a 0.3 percent gain when they beat. The performance gap is more pronounced for August, where miss days saw the equity benchmark falling 0.4 percent versus a 1.2 percent advance for positive surprises.
     Momentum is already fading in U.S. stocks after a rally added almost $4 trillion to U.S. equity values from the February bottom. Since a slew of all-time highs ended a 14-month drought in mid July, the S&P 500 has been stuck in neutral amid mixed economic reports and speculation over the timing of the next Fed rate increase.
     The benchmark index on Thursday briefly fell to 2,157.09, near the lower bound where it’s found support in the past month, as crude oil sold off and data showed an unexpected contraction in manufacturing activity. The gauge rebounded in afternoon trading to all but erase losses, as gains in technology and consumer-discretionary shares offset declines in banks and energy producers. The Dow Jones Industrial Average rose 18.42 points to 18,419.30, after falling more than 100.
     “A ‘headline miss’ would come as little surprise this time around, although nothing can really be said to be expected with this erratic data-set,” Michael Shaoul, chief executive officer of Marketfield Asset Management in New York, wrote in a note this week. “With the FOMC increasingly split between those who wish to raise the policy rate and those that wish to wait a while longer, the quality of U.S. labor market metrics is likely to be a key determinant as to what actually transpires in the coming weeks.”
     To Leo Grohowski, who helps manage more than $197 billion in client assets as chief investment officer of BNY Mellon Wealth Management in New York, a stronger jobs report could spark a selloff as the prospect of higher borrowing costs is seen as outweighing the benefit from economic strength. Prices for Fed funds futures imply a 34 percent chance of a rate hike in September.
     “You’re seeing the nervousness around the employment number and the Fed creep back into the market,” said Grohowski. “It’s frustrating when there’s so much riding on a number.”
     A recent surge in the CBOE Volatility Index reflects some of that anxiety. After reaching a two-year low on Aug. 19, the measure of market turbulence known as the VIX has climbed in eight of nine sessions while capping its biggest monthly gain in a year. The gauge rose 0.5 percent Thursday. About 6.4 billion shares traded hands on U.S. exchanges, 6 percent below the three-month average.
     Investors have ample reason to be apprehensive. The weakest economic recovery since World War II, along with lower oil prices and a stronger dollar, has taken its toll on corporate profits. S&P 500 earnings dropped for a fifth straight quarter during the April-June period, the longest decline since the global financial crisis. As the index hovers near record highs and analysts’ profit forecasts keep falling, stocks are trading at the highest multiple in more than a decade.
     Among shares moving today, Wal-Mart Stores Inc. advanced 2 percent as the retailer plans plans to move about 7,000 back- office workers in its supercenters to other parts of the store in a push to streamline operations. Campbell Soup Co. sank to an almost seven-month low after a disappointing forecast, hurt by a product recall and a poor carrot harvest at its Bolthouse Foods unit.

Have a wonderful evening everyone.

Be magnificent!

In music, I am melody.
The Bhagavad Gita

As ever,

Carolann

Dear Ike, Today I spat in the Seine.
    -General George Patton, 1885-1945
[Message to Eisenhower after Patton crossed the Seine in World War II]

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