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J.C. HOOD INVESTMENT COUNSEL
INC. |
Hello Everyone:
Note: when I wrote this Newsletter earlier this week, I was waiting to hear the Fed decision on tapering, i.e. buying fewer bonds. The fact that today the Fed decided to taper earlier than anticipated indicates that the economy is improving and that employment numbers are rising. Both Canadian and U.S. markets viewed this very positively with strong triple digit gains.
Housekeeping - New Services: I have finally got the Croesus software that I lease from NBCN customized to accurately categorize ETFs by asset class. Since these are color coded, I think that you will find them useful, particularly when it comes to Equity/Income allocation issues as described in the last newsletter. As we enter the New Year, I will begin emailing these to you. We will also be emailing capital gains/loss statements for your CA.
U.S. Markets: I was on BNN last Friday and commented that I continued to be very bullish on the US market. There have been three very significant events in the US over the past two weeks. Firstly, that ‘tapering’, i.e. the Fed buying fewer bonds, may be coming about sooner than anticipated because of continuing positive employment numbers. This means that ‘tapering’ is already priced into the market therefore less volatility when it begins. Secondly, the House voted overwhelmingly in favor of a compromise budget which means no more possible government shut downs for two years. The Senate is expected to consent also. Thirdly, the Volker Rule has been passed to limit the degree of risk taken by banks with their own funds, i.e. hedge funds and swaps. These events eliminate a lot of uncertainty in the capital markets and US budget.
From a market perspective, there is even more positive news. Former market ‘Bear’, David Rosenberg explains that as employment rises there will be shortages of skilled labor leading to higher wages. These people will spend more thus increasing GDP. Further, both the U.S. government and the U.S. consumer have cut back on debt. Unlike Canadian consumers, U.S. households have slashed debt by 25%, which means they are in a better position to spend. Because the U.S. had been both purchasing less foreign oil and selling more oil globally, the U.S. debt/GDP has been reduced from 10% to 4%. All very healthy sign for the U.S.
Canadian Markets: I hope that Canada will be swept along as we traditionally have been by growth in the U.S .economy. I am still bullish on the energy sector but concerned about the loss of manufacturing jobs is Ontario. I believe that this means that the $CDN will be allowed to drift even lower to encourage manufacturing and exports. This is why we are purchasing U.S. ETFs in U.S. dollars.
On behalf of Christine and
I, we would like to thank you for your business and your friendship this past
year. We wish you and your family
Seasons Greetings and a Happy, Healthy and Prosperous New
Year!!!
If you have any questions, please don’t hesitate to call.
THANK YOU FOR YOUR
BUSINESS
John
Member of the PORTFOLIO MANAGERS ASSOCIATION OF CANADA