**February 14th Issue of The JMRD Market Observer**

February 17, 2014

 

In This Week’s Market Observer…

  • JMRD Market Strategy Comment
  • RRSP Deadline Reminder
  • National Bank of Canada Stock Split
  • 2014 Federal Budget Review
  • Markets Review – January 2014
  • Peter Hodson from 5i Research answers members top questions
  • Thackray Market Letter – February 2014
  • Retirement Corner
  • Week at a Glance
  • Reads of the week
  • Economic Calendar
  • Earnings Reports

JMRD Strategy Comments

It has been quite a volatile start to the year in the financial markets.  January and the first part of February saw nearly the exact opposite action to what we saw in the last five months of 2013.  Specifically, all major equity markets were down while bonds and fixed income assets were up in price.  This was a natural reaction to such a strong equity performance to finish off 2013.  We viewed the pullback in equities as temporary and the strength in lower risk assets and fixed income is again a reminder that a diversified and balanced portfolio with different types of assets is often the best long term strategy.  In the first six weeks of the year, we did not make any major changes within our baskets or to our strategy for 2014 and that has served us well.  We continue to believe that this year will be similar to 2013 in that there will be periods of volatility but that overall equities will be positive, although probably not as strong as last year.  We also believe that quality low risk fixed income holdings should perform a little better than last year.  The overall result for a balanced account should be similar to the returns achieved in 2013.

2013 RRSP Deadline

The 2013 RRSP deadline is fast approaching! The last day to contribute for the 2013 tax-year is Monday March 3rd at 2:00pm. We would encourage clients to make their contributions sooner rather than later, with mail delays and other last-minute issues that can arise. RRSP contributions can also be made online. The contribution limit for 2013 is 18% of prior year earned income to maximum of $23,820.00

National Bank of Canada Stock Split

National Bank shares were trading at half their ‘normal’ value on Friday due to its shares splitting 2 for 1.  If you own National Bank shares and see in your account on-line that the value is about half of yesterday’s value, do not be alarmed.  It will take the system a few days to reflect the proper number of shares in your account.  You will now own double the shares that you owned prior to the split.

2014 Federal Budget Review

Attached is a summary of the 2014 Federal Budget which highlights the main changes and impacts for:

  • Individuals
  • Charities and Non-Profit organizations
  • Businesses

The summary also highlights other key measures coming from the new budget.

BUDGET 2014                    

NBF MARKETS REVIEW – JANUARY 2014

Equity markets tumbled (in local currency terms) and bonds soared at the beginning of 2014, in a sharp reversal of the trend that persisted throughout most of 2013.

The selloff in equities was triggered by fears of a meltdown in the emerging markets, where financial worries coupled with political turmoil have caused investors to flee to safer havens.

A great majority of the flows seeking safety found it in developed nations’ bonds such as in Canada and the U.S., which caused yields on these issues to tumble to three month lows. Other flows in search of a safe harbour found it in gold, which after suffering one of its worse years ever in 2013, gained 2.9% to start 2014.

Undeterred by the latest market actions, the Federal Reserve met late in January and decided to continue with the reduction of its asset purchases by trimming an additional $10 billion in February, split evenly between Treasuries and Mortgage Backed Securities. The Fed’s decision was supported by the fact that the economy in the U.S. is continuing to improve, companies are beginning to invest and hire, while disinflationary pressures seem to be ebbing. Federal Reserve officials and private economists dismissed the latest batch of weak economic data – including a stunningly weak December employment report – citing the cold snap that froze most of North America during the month as a temporary culprit.

Also in January, companies continued to report on their earnings, which as at this writing have come in mostly above expectations. That being said, a good number of blue chip companies missed revenue expectations, while a number of others revised their guidance lower.

Heading into February, all eyes remain fixated on the emerging markets to see if authorities in troubled regions such as Turkey, South Africa and others will be successful in their attempts to stem the slide in their currencies. After all, Turkey’s Central Bank did increase its overnight lending rate to 12% from 7.75%, while South Africa’s Central Bank pushed its key rate higher by 0.50%. Both moves did have an impact, but the impact was short lived. Analysts expect other countries such as Brazil, Chile, Hungary, Indonesia and Thailand to increase rates in the coming weeks and months.

Markets Review

Peter Hodson from 5i Research answers the top 5 questions asked by members in January

Watch the video to get answers to:

1) Should investors be worried about the emerging market situation?
2) Is the REIT sector still worth buying?
3) Should I sell everything now and wait for a pullback in the markets?
4) Is the gold sector recovery real?
5) What are the prospects for growth in the stock market this year?

http://www.youtube.com/watch?v=NWeHauh-FEs&feature=youtu.be

Thackray Market Letter – February 2014

February update from Horizons Seasonal Rotation ETF (HAC), an ETF Basket holding. The objective of HAC is long-term capital appreciation in all market cycles by tactically allocating its exposure amongst equities, fixed income, commodities and currencies during periods that have historically demonstrated seasonal trends. The Thackray Market Letter is for educational purposes and is meant to demonstrate the advantages of seasonal investing by describing many of the trades and strategies in HAC. In January, HAC returned -3.6% vs 0.5% for the TSX Composite Index and -3.6% for the S&P 500, with lower volatility than the indexes. Since November 19 2009 inception date, HAC has returned 37.8% vs the TSX Composite return of 18.1% and S&P 500 return of 62.8%. This month’s update includes a discussion of current holdings and seasonal trades in, Materials, Consumer Discretionary, Retail, Financials, Canadian Banks, Semiconductors, Silver, Metals and Mining, Homebuilders, Natural Gas, Financials, Natural Gas, Silver, Homebuilders, Semiconductors and Canadian Banks

Thackray Market Letter February

Week at a Glance

Week At A Glance

Retirement Corner

The Flip Side of Retirement in the Sun? A tax headache” (Globe and Mail)

“Want to retire in Canada? Here are seven surprisingly warm spots” (Globe and Mail)

Reads of the week

“Loonie’s Worst Seen Behind as Bulls Embrace Surplus” (Bloomberg)

“Time to shift weighting in materials stocks” (Financial Post) The changing performance dynamic between two of Canada’s biggest equity sectors is creating an opportunity for investors who shift their S&P/TSX 60 exposure from market-cap weighted funds to equal-weighted funds, says NBT ETF Strategist, Pat Chiefalo.

“Telus Tops 133-Year-Old BCE to Be Canada’s No. 2 Mobile Carrier” (Business Week) Telus is held in the JMRD DIG Basket

“AutoCanada shares rally still has traction” (Globe and Mail) AutoCanada is held in the JMRD All-Cap Growth Basket http://www.theglobeandmail.com/globe-investor/investment-ideas/still-plenty-of-gas-in-the-tank/article16882257/

“Rosenberg Sees Inflation After Calling Housing Bust in Recession” (Bloomberg)

“Harper Collides With Native Canadians’ Natural Resources Claims” (Bloomberg)

Investing’s Biggest Irony: Everyone Thinks They’re a Contrarian” (The Motley Fool)

“Why I Love Amazon.com but Won’t Buy Its Stock” (Institutional Investor) Here is what I have learned over the years. You don’t have to own all the great companies. You can just enjoy their products and services until they stumble. They always do. Wall Street love affairs are like Hollywood marriages; they’re not forever. Look at Apple. I have always loved their products (I have owned every single iPhone), but I waited until I could buy the stock on my own terms, when I could value it and have a margin of safety. The same applies to electric car–maker Tesla Motors. My next car will probably come from them, but I’ll wait patiently for Tesla’s stock to become reacquainted with the concept of gravity.

Ethanol Evangelist Shrugs Off Volatility to Build Powerhouse” (Bloomberg)

Israel Desalination Shows California Not to Fear Drought” (Bloomberg)

Economic Calendar

Monday February 17th – Canadian Markets closed for Family Day. U.S. Markets closed for Presidents’ Day

Tuesday February 18th – U.S. Empire Manufacturing

Wednesday February 19th – Canadian Wholesale Trade Sales, U.S. Housing Starts, U.S. PPI, Fed Releases Minutes from Jan 28-29 FOMC Meeting

Thursday February 20th – U.S. CPI, U.S. Initial Jobless Claims, U.S. Leading Index

Friday February 21st – Canadian Retails Sales, Canadian CPI, U.S. Existing Home Sales

Earnings Reports

Monday February 17th – None

Tuesday February 18th – Yamana Gold

Wednesday February 19th – Horizon North Logistics, Northland Power, Superior Plus

Thursday February 20th –Agrium, Inter Pipeline, Loblaw Cos, Tim Hortons, TransAlta and Wal-Mart Stores

Friday February 21st – Enerplus Corp, First Capital Realty

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