September 2, 2016 Newsletter

Dear Friends,

Tangents:

September 2, 1666: Great fire of London.

And so begins the last long weekend of the summer of ’16 – enjoy!
PHOTOS OF THE DAY

The Catacomb of Veils is burned as approximately 70,000 people from all over the world gather for the 30th annual Burning Man arts and music festival in the Black Rock Desert of Nevada on Friday. Jim Urquhart/Reuters

Visitors take pictures at the IFA Electronics show in Berlin on Friday. Stefanie Loos/Reuters

A man hikes in the western Austrian village of Grinzens, Austria on Friday. Dominic Ebenbichler/Reuters
Market Closes for September 2^nd, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By Eric Lam
     (Bloomberg) — Canadian stocks rose the most in four weeks as commodity producers rallied, joining a lift in U.S. equities after American payrolls posted steady gains in August.
     The S&P/TSX Composite Index rose 0.8 percent to 14,801.25 at 10:57 a.m. in Toronto, headed toward the highest close since Aug. 9. The benchmark gauge advanced for the sixth time in seven days in trading volume 30 percent higher than the 30-day average at this time of the day.
     The U.S. economy added 151,000 jobs in August, short of a 180,000 median forecast in a survey of economists by Bloomberg. That follows a 275,000 gain in July that was larger than previously estimated, according to a Labor Department report Friday. The jobless rate held steady at 4.9 percent. Canada’s August jobs figures will be released on Sept. 9.
      “The revision in the upside in July plus the miss in August leaves us pretty much right on target,” said Kevin Headland, senior investment strategist at Manulife Investments in Toronto. Manulife’s asset management unit manages about $334 billion. “It’s still positive, there’s definitely no reason to be negative on it.”
     Raw-materials and energy producers surged at least 1.1 percent to lead gains in the S&P/TSX as commodities prices rose. Kinross Gold Corp. and Goldcorp Inc. rallied more than 2.2 percent, with gold climbing for a second day after capping the first monthly loss in seven years. A gauge of the dollar swung between gains and losses.
     Suncor Energy Inc. and Canadian Natural Resources Ltd. rose at least 1.4 percent. Oil snapped four days of declines, climbing as much as 3 percent in New York. Russian President Vladimir Putin said in an interview with Bloomberg he’d like Russia and OPEC to reach an output freeze while exempting Iran as it raises production to pre-sanctions levels.
     A surge in the commodity sector has boosted the Canadian equity benchmark to an almost 14 percent jump in 2016, rebounding from a slump last year that was the worst for the S&P/TSX since the 2008 financial crisis. The S&P/TSX is also the second- best performing developed market in the world, just behind New Zealand. Canadian stocks are more expensive than their U.S. peers, with a price-earnings ratio of 23.5 for the S&P/TSX, opening up a 15 percent premium over the S&P 500 Index.
     The yearlong rally in Canadian equities hit a bump in the road 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 50 percent, an increase that would halt the longest yearly losing streak since 1988. Energy producers have gained 21 percent in 2016, on pace for the strongest in seven years.
     Valeant Pharmaceuticals International Inc. pared an early 4.4 percent drop sparked by Democratic presidential nominee Hillary Clinton’s plan for proposals to curb drug prices, including penalties for unjustified increases. Valeant shares have plunged some 90 percent from an August 2015 peak amid increased scrutiny over the industry’s pricing practices.

US
By Anna-Louise Jackson and Joseph Ciolli
     (Bloomberg) — U.S. stocks climbed as August payroll data signaled steady labor-market growth, though not enough to force the Federal Reserve to raise interest rates.
     A report showed fewer jobs than forecast were added last month, tempering increased speculation that policy makers could boost borrowing costs as soon as this month. That brought a measure of relief to investors, who boosted utilities, raw- materials and energy shares the most. Crude oil rebounded from a four-day slide. The odds for a rate hike this month briefly dipped as low as 20 percent before climbing back to levels held before the data.
     The S&P 500 Index rose 0.4 percent to 2,179.95 at 4 p.m. in New York, halting a three-day decline. Stocks wavered at midday, trimming most of an early rally before recovering in the late afternoon. U.S. equity markets are closed on Monday for Labor Day.
     “This number is important in whether the Fed hikes in September, and along with the ISM report helps push a September rate hike off the table,” said Jeffrey Kleintop, Charles Schwab Corp.’s chief global investment strategist. “The move in the market is probably related to a little sense of relief that a rate hike will be pushed off. Given the ISM was weaker, some people would’ve been concerned if the Fed went in September.”
     Payrolls climbed by 151,000 last month following a 275,000 gain in July that was larger than previously estimated, according to the Labor Department. The median forecast in a Bloomberg survey called for 180,000. The jobless rate and labor participation rate held steady, while wage gains moderated.
     While Fed Chair Janet Yellen left the timing of an interest-rate hike open in a speech last week, she said the central bank’s decisions depend on the degree that data “continues to confirm” the outlook. That, and other recent remarks by Fed officials, suggest that job gains need to be merely solid — rather than extraordinary — to warrant raising borrowing costs for the first time in 2016.
     Richmond Fed President Jeffrey Lacker said Friday the message he took from the August data was that “labor markets are continuing to tighten.” He called the report “reasonably strong.”
     Even as some saw the lower-than-forecast payroll gains as reason enough for the Fed to stand pat, traders weren’t so sure. Fed-funds futures reflected a 32 percent chance the central bank will boost rates at its September meeting, according to data compiled by Bloomberg. Odds of a December hike are 59 percent.
     “There’s no question that the number lowers the odds of a September rate hike, but I wouldn’t say it’s been completely taken off the table,” said Matt Maley, an equity strategist in New York at Miller Tabak & Co LLC. “It doesn’t seem like currency and credit markets have taken September off the table yet.”
     With today’s climb, the S&P 500 gained 0.5 percent this week, after ending in the red for the prior two. Since the gauge reached a record in mid-August, it’s been stuck in neutral amid Fed rate-hike speculation and lackluster economic data, including a reading yesterday showing manufacturing activity contracted last month. The benchmark index hasn’t seen a 1 percent move in either direction for 40 days, the longest such streak in more than two years.
     August employment reports tend to miss economist estimates, and that’s typically been bad news for equities. Since 1996, 15 out of 19 releases have trailed forecasts, data compiled by Bloomberg show. When they did, the S&P 500 Index fell an average 0.4 percent, compared with a mean increase of 0.1 percent for all payrolls days.

Have a wonderful weekend everyone.

Be magnificent!

To find God, you must welcome everything.
Rabindranath Tagore

As ever,

Carolann

Friendship multiplies the good of life and divides the evil.
                                       -Baltasar Gracian, 1601-1658

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