**June 26th Issue of The JMRD Market Observer**

June 27, 2014

In This Week’s Market Observer…

 NBF Monthly Economic Monitor – July/August 2014

  • NBF Fixed Income Monthly Monitor – July 2014
  • JMRD Basket Corner
  • Retirement Corner
  • Reads of the week
  • Economic Calendar
  • Earnings Reports

 NBFM Monthly Economic Monitor – July/August 2014

Highlights:

An awful start to the year, largely due to the surprising slump in the U.S., prompted us to cut our 2014 global growth forecast to just 3.3%. That, however, still represents an acceleration from last year’s pace. We continue to call for 3.8% growth next year, one tick lower than the IMF’s estimate, although that forecast too may be vulnerable if the recent upswing in oil prices is sustained.

Like the IMF, the Fed and others, we are cutting our 2014 growth forecasts for the U.S. to account for the steeper-than-expected slump at the start of the year. That said, considering the temporary factors at play in Q1 (bad weather and destocking), there is reason to be optimistic for the rest of the year. The private sector already seems to be bouncing back, buoyed by the end of household deleveraging and better investment spending made possible by the return of confidence and strong corporate profits.

Like its southern neighbour, Canada is set for a quick rebound after a rough start to the year. U.S. re-leveraging bodes well for exports. Domestic demand will remain under pressure as debt-laden households cap consumption growth, housing softens, and government outlays are limited by tight fiscal policy. But thanks to rising corporate profits, business investment has potential to bounce back and provide an offset.  We expect Canadian GDP growth to accelerate to 2.3% this year.

Monthly Economic Monitor

 NBF: Fixed Income Monthly Monitor – July 2014

Highlights:

Being data-dependent, monetary policy in the U.S. will adjust to the evolution of inflation and economic growth over the next 30 months. Since our forecast is for more inflation and job creation over that period, we see the first rate hike by the FOMC occurring in June 2015. The target rate should reach 2.5% by September 2016 and stay there through the end of the year.

A risk to our forecast is the situation in Iraq. A sharp drop in oil exports would not only push oil price up but would have consequences for global economic growth. The FOMC would have to maintain the current target range for the fed funds rate much longer and volatility would return to financial markets. Corporate spreads to Treasuries would also be under pressure.

In our base case scenario, the BoC’s measure of core inflation ends 2014 between 2.3% and 2.5%. In that case the Bank’s current focus on downside inflation risk will no longer be justified. We see the Bank adopting a more hawkish tone over the remainder of the year.

Monthly Fixed Income Monitor

JMRD Basket Corner

 All-Cap Basket

 Alimentation Couche-Tard (ATD.b) Alimentation Couche-Tard may look outside U.S. or to supermarkets for next deal”

U.S. Basket

 Manitowoc (MTW) – Activist investor Relational Investors LLC disclosed on Thursday that it owned an 8.5% stake in Manitowoc Co. and called for the company to spin off its foodservice-equipment business. Relational said in a regulatory filing that Manitowoc’s crane and foodservice segments are “core, yet incongruent businesses” that “differ materially in their operating metrics and cyclical characteristics.” Founded in 1996, Relational buys stakes in companies it considers undervalued and then lobbies management and boards for changes to boost investor returns. In recent years, the firm has targeted industrial companies including equipment manufacturer SPX Corp. (SPW), bearings maker Timken Co. and machinery builder Illinois Tool Works Inc. Relational is based in San Diego and manages about $6 billion. Shares of Manitowc traded higher by 9% on Friday to $32.47. MTW was purchased in the U.S. Basket in February at $28.686

Nike (NKE) – Nike Inc. said its fiscal fourth-quarter earnings rose 5.4%, helped by the sporting-gear company’s broad revenue growth across almost all its main geographic markets. The sporting footwear and apparel company has continued to benefit from strong demand in the U.S. and several international markets. The company also has seen continued success with product launches though consumers have been spending cautiously amid an uneven economic recovery. Following the earnings release, the shares traded higher by 1.5% on Friday.

ETF Basket

10 Top-Performing ETFs In First Half Of 2014: http://www.etf.com/sections/features/22500-10-top-performing-etfs-in-first-half-of-2014.html?showall=&fullart=1&start=2

 Retirement Corner

1) “Define, design: Proper estate planning begins here” (Globe and Mail)

Reads of the Week

 “This CEO’s out for blood” (Fortune) Elizabeth Holmes founded her revolutionary blood diagnostics company, Theranos, when she was 19. It’s now worth more than $9 billion, and poised to change health care.

“From Bushel to Bread: Waiting for the Wheat” This is the second part of The Globe and Mail’s ‘Bushel to bread’ series tracking the progress of a single shipment of grain, all the way from seeds in the ground to bread on the table.

“CFOs Share Their Stock Buyback Secrets (Institutional Investor)

 The Blackstone-Beating Firm You May Not Know (Hint: It’s Canadian) (Bloomberg) The best performer of the biggest publicly traded private-equity firms this year won’t be found among U.S. giants such as Blackstone Group or KKR & Co. The leader is Canada’s own contender, the dark horse in the race, Gerry Schwartz’s Onex Corp

 “Thirty years of ROB Magazine: 12 of our juiciest untold stories” (Globe and Mail)

 “How a Canadian company is lighting up the roadways of the world” (Globe and Mail)

“Where Have All the Traders Gone?: Ritholtz Chart” (Bloomberg View)

 LPL Financial Research: “World Cup and World CPI Are Heating Up, Risking Mistakes by Key Players”

LPL Financial Research

“Agnico Eagle CEO Prowls for More Gold Deals After Osisko” (Bloomberg) Agnico Eagle just closed the biggest deal in its 57-year history, but that doesn’t mean CEO Sean Boyd is putting away his checkbook

 “Henry Kravis, Still Shaking Wall Street, Steers KKR Into Lending” (Bloomberg)

 Even utilities are sexy these days (Bloomberg)

“Here’s Why an Apple iWatch Will Be a Big Hit With Consumers” (TheStreet.com)

 Economic Reports

Monday June 30th – Canada GDP, U.S. Pending Home Sales

Tuesday July 1st – Canada Day: Canadian Markets Closed, U.S. ISM Manufacturing

Wednesday July 2nd – U.S. Factory Orders

Thursday July 3rd – U.S. Initial Jobless Claims, U.S. ISM non-manufacturing

Friday July 4th – U.S. Independence Day: U.S. Markets Closed

Earnings Reports

Monday June 30th – None

Tuesday July 1st – None

Wednesday July 2nd – None

Thursday July 3rd – None

Friday July 4th – None

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