JMRD Market Observer for June 5th, 2015: Asset Allocation Strategy – June 2015

June 5, 2015

 **June 5th Issue of The JMRD Market Observer**

 

 

In This Week’s JMRD Market Observer

 

  • NBF Economics & Strategy: Asset Allocation Strategy – June 2015
  • NBFM Forex Report – June 2015
  • JMRD Insurance Corner
  • JMRD Basket Corner
  • Retirement Corner
  • Week at a Glance
  • Reads of the week
  • Economic Calendar
  • Earnings Reports

 

 

Asset Allocation strategy – June 2015

 

Market review

 

Performance‐wise, the month of May proved relatively uneventful. The S&P/TSX lost 1.2% of its value, weighed down by the financial (‐1.6%) and energy (‐6.0%) sectors. The S&P 500 (+1.3%) was the mirror image of its Canadian counterpart, with only two sectors posting negative returns.

 

Volatility in energy markets was high, with many days showing price variations in excess of 3%. In spite of daily movements, oil traded in a fairly tight range of $57 to $61 per barrel. On the bond side, U.S. 10‐year treasury yields increased by a meagre 0.05% during the month, as markets wait to see whether the economy will improve compared to Q1, which could finally push the U.S. Federal Reserve (Fed) to act.

 

Asset allocation strategy

 

  • While some indicators suggest that equities may be currently overvalued and carry a high risk of a correction should the Fed raises rates, we think there may still be some space for further appreciation. S&P 500 forward earnings are now turning a corner and the number of positive revisions is trending upward, which bodes well for future returns.
  • Though the rebound in 2015 may not be as strong as that witnessed in 2014, we expect to see solid numbers for the rest of the year, which should contribute to the pressures prompting the Fed to act.
  • With the year‐over‐year inflation now standing at 0.8%, the Bank of Canada can certainly afford the luxury of being dovish and trying to lower expectations of rate increases if the loonie strengthens.
  • In spite of the performance of the energy markets, we think that the rebound may prove temporary as the USD strengthens, and we remain confident that the general trend is still unfavorable for resource‐heavy markets and their currencies.

 

(Full report attached)

Asset Allocation Strategy – June 2015

 

NBFM Forex Report – June 2015

 

NBF’s Economics & Strategy team published its Monthly Forex Report for June.

 

Highlights:

 

Bailout or default?

 

  • The USD returned to winning ways in May as improving US data made clear to investors that the Q1 GDP slump was an aberration. We continue to believe that diverging monetary policies between the Fed and the rest of the world will push the trade-weighted USD higher over the rest of the year. But as we’ve seen in February and April, there could be short-term volatility if there are any hints the Fed may delay rate hikes to later, e.g. if data disappoints.
  • EURUSD soared to roughly 1.15 as we had expected, but then quickly crashed back to earth after a senior ECB official said QE will be front-loaded. The Greek situation didn’t help the common currency either. Athens has made clear it cannot meet its debt repayment obligations, meaning that there will be either a bailout or a default, the latter opening the door for Greece to leave the Eurozone. Our end-of-2015 target of 1.05 for EURUSD assumes no “Grexit”.
  • Like most other major currencies, the Canadian dollar struggled to cope with the USD’s resurgence in May. Soft economic data and weaker oil prices were largely behind the loonie’s depreciation. Considering the Bank of Canada’s optimistic tone on the economy, there is room for further disappointment. There are indeed downside risks to the BoC’s call for above-potential growth of 2.7% on average in the second half of the year, particularly if the impact of the oil shock on the economy lasts longer than expected. Diverging monetary policies in the US and Canada should take USDCAD even closer to 1.30 by the end of the year.

 

(Full report attached)

June Forex Report

 

JMRD Insurance Corner

 

This month – Maximizing Your Estate.  The financial planning process that we undertake with clients is designed to address not only your investment and income needs, but takes into account tax and estate planning issues that can be incorporated into your personal strategy.   The process can be successful well into your 80’s, but the earlier it is addressed, the more beneficial it can be.  This week’s topic will be the Estate Maximizer Strategy.

 

If in your present circumstance you:

 

  • find it important to leave a legacy, while maximizing the value of your estate, or
  • have surplus funds to invest (investment assets or cashflow), or
  • have a personal holding company or professional corporation, or
  • have a need to reduce your taxable income to maintain certain benefits

 

Read the attached article “The Estate Maximizer Strategy” and find out how.

Estate Maximizer Strategy – JMRD

 

JMRD Basket Corner

 

All Cap Growth Basket

 

Alimentation Couche-Tard (ATD.b) –  “Couche-Tard CEO Brian Hannasch on saving customers time” “We’re pursuing the same customer everywhere—a working person looking to save a few minutes in their day. We’re selling time”

Constellation Software (CSU) – Constellation Software announced on Thursday that its wholly owned division Vela Software, has acquired the business of Megabus Pty Ltd. Megabus is based in Melbourne, Australia, and specializes in enterprise software solutions for the retail and wholesale distribution business, with a particular focus on the Tire & Automotive industry sector. The Marlin suite of software products includes supply chain management, inventory control, wholesale distribution, retail distribution, point-of-sale, e-commerce, financial control, and business intelligence applications.

Element Financial (EFN) – “Element Financial continues run as best-performing Canadian financial stock” 

 

U.S. Growth Basket

 

Facebook (FB)How Facebook’s video-traffic explosion is shaking up the advertising world 

Synchronoss (SNCR) – Synchronoss jumped 18% on Thursday on news that the company may be up for sale. The wireless- and cloud-based software company said one analyst — Stifel Nicolaus’ Tom Roderick — thinks the company could fetch between $57 and $67 per share. Shares closed Friday at $50.29. On Wednesday the Wall Street Journal that Synchronoss had hired boutique-investment bank Qatalyst Inc. to advise it on the sale. Mr. Roderick gets to a possible sale price for Synchronoss by estimating that it would generate a multiple of roughly 12 to 14 its earnings before interest, taxes, depreciation and amortization in a sale to a private-equity buyer. Mr. Roderick also cited rivals Ericsson and Amdocs Ltd. as “solid fits.”

 

Facebook

 

Retirement Corner

 

“Multi-employer pension plans aim for certain payout, but no guarantees” (Globe and Mail)

 

Week at a Glance

 

(See attached Week at a Glance report)

Week At A Glance

 

Reads of the Week

 

Economic Reports

 

 

 

 

Monday June 8th – Canadian Housing Starts, Canadian Building Permits

Tuesday June 9th – U.S. Wholesale Inventories, U.S. Wholesale Trade Sales

Wednesday June 10th – U.S. Monthly Budget Statement

Thursday June 11th – Canadian New Housing Price Index

Friday June 12th – U.S. PPI Final Demand, U. of Michigan Sentiment

 

Earnings Reports

 

Monday June 8th – None

Tuesday June 9th – None

Wednesday June 10th – Dollarama

Thursday June 11th – None

Friday June 12th – None

 

Follow JMRD Wealth Management on Twitter at: https://twitter.com/JMRDwealth or @JMRDwealth

 

Have a good weekend!

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