September 26, 2016 Newsletter

Dear Friends,

Tangents:

On this day in…

1960 – the first televised debate between presidential candidates took place in Chicago as Republican Richard M. Nixon and Democrat John F. Kennedy squared off.

1789 – Thomas Jefferson was appointed America’s first secretary of state and John Jay the first chief justice.

1888 – Poet T.S. Eliot was born in St. Louis, Mo.

1898 – Composer George Gershwin was born in Brooklyn, New York.

1914 – The Federal Trade Commission was established.

1950 – United Nations troops recaptured the South Korean capital of Seoul from the North Koreans.

1969 – The album “Abbey Road” by the Beatles was released.

T.S. Eliot, born 1888.

STAGE MAGIC
Tickets for the West End production of Harry Potter and the Cursed Child may be hard to obtain, but a video taking you behind the curtain with set designer Christine Jones includes tantalizing glimpses at some of the scenery and effects that bring the story to life.  See the video at http://bit.ly/hpottercursedchild.  

We shall not cease from our exploration, and at the end of all our exploring, we shall arrive where we started and know the place for the first time. –T.S. Eliot.
PHOTOS OF THE DAY

People walk across a bridge between tree-like structures at the Gardens by the Bay park in Singapore on Monday. Jorge Silva/Reuters

People enjoy a swing ride in front of St. Paul’s church at the 183rd Oktoberfest beer festival in Munich, Germany, on Monday. The festival runs until October 3. Matthias Schrader/AP
Market Closes for September 26^th, 2016

International Markets

Bonds

Currencies

Commodities

Market Commentary:
Canada
By John Hyland
     (Bloomberg) — Canadian stocks declined a second day, tracking losses in U.S. shares spurred by weakness in banks, while investors prepare for the U.S. presidential debate and a meeting between major oil producers this week.
     Ten of 11 main groups in the Canadian benchmark index retreated, with bank shares contributing the most to losses as concern mounted that Deutsche Bank AG’s slump could destabilize the European banking sector. Consumer shares slid as household confidence fell after views of the country’s economic prospects hit the lowest in six months. Energy shares declined despite crude gains ahead of an OPEC meeting.
     The S&P/TSX Composite Index fell 0.5 percent to 14,619.46 at 4 p.m. in New York, paring its advance this quarter to 4 percent. The measure has gained 12 percent this year, second- most among developed markets tracked by Bloomberg. The rally has pushed the price-to-earnings ratio for stocks in the index to 23.3 times reported profit, about 15 percent higher than the valuation for S&P 500 Index shares.
     Monday’s slump was attributable to financial-service firms, which lost 0.6 percent amid a global selloff in banks. The Royal Bank of Canada and Toronto-Dominion Bank fell 0.6 percent.
     Canada’s lenders and insurers, which account for one-third of the S&P/TSX by weighting, took an extra hit from data showing the nation’s core inflation rate was the slowest in two years in August. That spurred bets the economy may need added monetary stimulus, with any lower rates crimping profits at financial institutions.
     Shares of consumer stocks fell at least 1 percent amid the confidence data. Loblaw Cos. and Cott Corp. plunged more than 1.6 percent to pace declines.
     Energy producers declined 0.4 percent, even as crude surged in New York after Saudi Arabia offered to cut output, signaling the possibility for a future OPEC deal. TransCanada Corp. declined 1 percent, after the company agreed to buy all outstanding units of Columbia Pipeline Partners LP for about $848 million in cash.
     Raw-materials producers lost 0.5 percent as spot gold declined. Barrick Gold Corp. fell 0.5 percent.

US
By Joseph Ciolli
     (Bloomberg) — Even before Deutsche Bank AG’s drop to a record low dragged down U.S. financial shares on Monday, investors were braced for the worst.
     Blame the Federal Reserve’s decision to hold interest rates steady last week, prolonging the wait for higher yields on cash holdings for financial firms. Traders responded by pushing short interest on an exchange-traded fund tracking the industry to a seven-month high, according to data compiled by Bloomberg and IHS Markit Ltd.
     That’s proven prescient as concerns over Deutsche Bank’s weakened finances sent an index of financial companies in the S&P 500 Index down 1.5 percent at 4 p.m. in New York, while the benchmark gauge lost 0.9 percent to 2,146.10. It marked the latest hiccup for a sector already maligned by a nearly 12 percent plunge this month for scandal-plagued Wells Fargo & Co., formerly the biggest U.S. bank by market value.
     “The fact that rates were not raised made financials a relative underperformer last week,” said Michael James, managing director of equity trading at Wedbush Securities Inc. in Los Angeles. “And given what’s going on with Deutsche Bank and Wells Fargo, I would expect that weakness to continue with financials as a whole. It could be a headwind to the whole market making an upside move.”
     Short interest on the Financial Select Sector SPDR ETF rose to 4.5 percent of shares outstanding on Thursday, the highest since Feb. 2, IHS Markit data show. Still, it wasn’t the first time investor skepticism around financial stocks perked up in recent weeks. In a Sept. 14 note to clients, Goldman Sachs Group Inc. said that while investors should be getting bullish on banks ahead of a rate hike, the cost to hedge them is no different from the broader S&P 500.
     Now, with the Fed’s decision to stand pat on lending rates in the rear-view mirror, investors are turning their attention to the first of three televised debates between presidential candidates Hillary Clinton and Donald Trump tonight. The pair is deadlocked in a head-to-head race in the latest Bloomberg Politics national poll. The Democratic candidate had a 6-point advantage on her Republican rival in August. A Trump victory could lead to equity declines, Citigroup Inc. analysts warned last month.
     Investors are also awaiting a meeting between major oil producers this week after crude slumped on Friday on concern OPEC won’t reach an agreement to curb output. Its members and Russia meet on Wednesday in Algiers to discuss coordinated action to support prices. Crude rebounded Monday from its worst one-day drop in more than two months, as Saudi Arabia’s offer to cut output opened the door to a future deal.
     The S&P 500 increased 1.2 percent last week as the Fed’s decision to hold rates steady renewed the appeal of stocks to yield-seeking investors — although the move higher was damped by a 0.6 percent decline on Friday.
     “The spillover from Friday’s weak action, with nothing material coming from overseas other than the Deutsche Bank concerns, it’s not surprising to see the market with a weaker tone,” said James. “There isn’t a lot happening this week, so the presidential debate is likely to have a big impact tomorrow and potentially going forward.”
     Lenders in the S&P 500 posted the steepest slide in almost three months, with Bank of America Corp. and Citigroup Inc. losing more than 2.6 percent, while the yield on the 10-year Treasury note fell to a two-week low. The Dow Jones Industrial Average dropped 166.62 points, or 0.9 percent, to 18,094.83, while the CBOE Volatility Index jumped 18 percent. About 5.9 billion shares traded hands on U.S. exchanges, 11 percent below the three-month average.
     Deutsche Bank slumped 7.1 percent in U.S. trading after a media report said the German government wouldn’t step in to back the lender. Chief Executive Officer John Cryan’s efforts to shore up profitability and capital, by cutting thousands of jobs and shrinking, have been put at risk by the U.S. Justice Department requesting $14 billion to settle a probe tied to residential mortgage-backed securities.
     Among shares moving on corporate news, Pfizer Inc. slipped 1.8 percent after deciding not to pursue a strategy of splitting into two separate companies. Bats Global Markets Inc. fell 4.6 percent after agreeing to be bought by CBOE Holdings Inc. for about $3.2 billion in cash and stock. Bats jumped 20 percent Friday on a Bloomberg report that the two companies were in talks.
     Investors are also weighing economic data and the prospects for corporate profits, with Alcoa Inc. unofficially kicking off the next earnings season when it reports results on Oct. 10. A gauge today showed purchases of new homes dropped in August after surging a month earlier to the fastest pace since 2007. Releases on durable-goods orders, a revised look at second- quarter growth, as well as readings on personal income and spending are due later this week.

Have a wonderful evening everyone.

Be magnificent!

What is the soul?  The soul is consciousness.
It shines as the light within the heart.
Brihadaranyaka Upanishad

As ever,

Carolann

All great leaders have had one characteristic in common: it was the willingness
to confront unequivocally the major anxiety of their people in their time.  This,
and not much else, is the essence of leadership.
                                          -John Kenneth Galbraith, 1908-2006

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