November 2014

The Boat Stays Afloat!
Last month we wrote about navigating choppy waters. Although still some distance from what could be considered calm, global stock markets appear to have weathered the sell-off storm. As less-than-satisfactory economic data rolled in from Europe and China, commodity prices did a downward dog. The ripple effect was felt throughout our home country and seamlessly penetrated borders worldwide. The 10% correction that naysayers have been calling for years has finally occurred – good thing we didn’t listen to them earlier, or we would have missed the strong returns offered in the past two years!

Since the correction, stocks have seesawed back and forth while making steady progress towards levels offered earlier this year. The most closely watched United States Index, the S&P500, has virtually made up all its lost ground. On the contrary, the main Canadian Index still has some room to go, but is up ~7% since its low in early October and remains up over 10% on the year (Bloomberg, 2014).

Going forward we would expect stocks in the United States to moderately outperform their counterparts in Canada. In the third quarter of 2014 the United States grew at a 3.5% annual pace buoyed primarily by higher exports and government spending (MarketWatch, 2014). While Canada wasn’t able to match such an impressive growth rate, third quarter GDP came in at a reasonable 1.4% as oil and gas maintenance affected output and manufacturing fell (Reuters, 2014). We believe the Canadian Index as a whole will be dragged down by commodities, while bright spots continue to present buying opportunities.

One last piece of economic news that came out yesterday was the winding down of asset purchases by the United States Federal Reserve. The unprecedented economic stimulus is finally coming to an end! Focus will now transfer to a new question: when will rates rise? Let’s save that discussion for another day. For now, let us rejoice – the boat is still afloat and stocks can resume their upwards trajectory as the bulls once again begin to outnumber the bears.

MarketWatch. (October 31, 2014). U.S. Economic Calendar.

Palmer, R. (October 31, 2014). Canada GDP in August registers first fall since December.

This newsletter was prepared solely by Bruce Morrison who is a registered representative of HollisWealth™ (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The view and opinions, including any recommendations, expressed in newsletter are those of Bruce Morrison only and not those of HollisWealth. TM Trademark of The Bank of Nova Scotia, used under license. Morrison & Partners Wealth Strategies is a personal trade name of Bruce Morrison.