JMRD Market Observer for December 23rd, 2016 – Happy Holidays!

In This Week’s JMRD Market Observer



  • Season’s Greetings

  • NBFM Monthly Economic Monitor

  • NBFM Fixed Income Monitor

  • NBF Geopolitical Briefing: S. Tax cuts/reforms: How big a deal?

  • JMRD Basket Corner

  • Retirement Corner

  • Reads of the Week

  • Economic Calendar

  • Earnings Report



Season’s Greetings!


The JMRD Team wishes you all the best over the Holiday Season!




NBFM Monthly Economic Monitor – January 2017



  • Investors will look to 2017 with anticipation, hoping pro-growth fiscal policies are enacted to address the problem of declining potential. Advanced economies as a group are likely to see a pick-up in growth as a stronger U.S. offsets Brexit-related moderation in Europe. Emerging markets should continue to decelerate amidst headwinds brought by China’s re-balancing and deteriorating demographics. We’re calling for world GDP to expand 3.3% in 2017, while acknowledging downside risks including the rise of trade protectionism and record amount of USD-denominated debt which has become harder to service after the greenback’s historic surge.


  • Fiscal stimulus is making a comeback in America. Republican control of both houses of Congress puts President-elect Trump in a good position to successfully push his agenda. The combination of tax cuts and spending increases should lift U.S. GDP growth above 2% in both 2017 and 2018. With little slack left in the economy, the fiscal boost will allow inflation to hit the Fed’s target for the first time in five years, although the persistence of dollar strength and demographic challenges should prevent runaway prices.


  • After two years of under performance, Canada could return to above-potential growth in 2017. A stronger U.S. economy and the implementation of the Comprehensive Economic and Trade Agreement should have positive repercussions for Canada’s non-energy exporters, while government spending will support domestic demand and offset an expected moderation in consumption growth and housing. We expect Canada’s economy to grow about 1.9% in 2017, although a stronger performance is possible should oil prices surprise enough on the upside to rekindle investment spending, more so after the federal government’s approval of two major pipelines. However, downside risks such as disappointing global growth or restrictive trade policies from the incoming U.S. administration or others should not be underestimated


See the full article.



NBFM Monthly Fixed Income Monitor – January 2017



  • Until we know more about what the new administration will deliver, our base case scenario is US GDP growth of 2.2% in 2017 and 2.4% in 2018, leaving the year-end unemployment rate at 4.8% in 2017 and 4.6% in 2018. In these conditions we still see only two rate hikes in 2017 and three in 2018.


  • Assuming president-elect Trump’s policy mix ends up pro-growth for North America and 10-year Treasuries are heading toward 3.03%, we expect Canada’s 10-year to be dragged partway along, yielding 2.14% by year end 2017.


See the full article.



Geopolitical Briefing: U.S. Tax cuts/reforms: How big a deal?


While Trump and many Congressional Republicans do not see eye to eye on such matters as trade and foreign policy, they are in a broad agreement that taxes must be cut and the tax system reformed. The main point of contention is whether tax cuts should be combined with reductions in government spending. Congressional Republicans are officially in favour of reducing spending, while Trump campaigned on the promise that entitlements would not be touched and that defense and infrastructure spending would be increased. In our opinion, this difference should not prevent Trump and the Congressional Republicans from agreeing on a new tax plan, which could include a major overhaul of how corporate taxes are collected, early in Trump’s mandate for reasons explained in the attached report.


See the full article.



JMRD Basket Corner


DIG Basket


BCE (BCE) – As telegraphed late last week, the CRTC rendered its decision on Bell’s takeover of MTS. Coming as no surprise, given the rather narrow focus of its review – MTS’s broadcasting distribution undertaking (BDU) licenses in Manitoba – the CRTC approved their change of effective control to BCE. As per CRTC policies, the transaction didn’t trigger the payment of tangible benefits. Besides acceptance of MTS shareholders, BCE received Court as well as CRTC approvals for the deal.


See the full article.


Open Text (OTC) – With the closing of the $564 mln public equity offering (excl. 15% over-allotment), consisting of 9.25 mln shares issued at $61.00 per share, we’re reinstating coverage of Open Text with an Outperform rating and US$90 target. Proceeds from the transaction will be used to partially fund the $1.62 bln acquisition of Dell EMC’s Enterprise Content Division (ECD), including fees and expenses. While the equity raise will dilute shareholders on a standalone basis, we estimate that dilution will be offset by an accretive ECD transaction, once closed. More importantly, we see the pending acquisition as another step to driving over $6.00 in EPS as Open Text approaches $3 bln in capital deployed. Post the closure of the ECD transaction, we estimate Open Text to have Net Debt of ~$2.4 bln, resulting in a comfortable 2.4x Net Debt/EBITDA leverage based on F2018 if we were to include our preliminary ECD contribution estimate. More importantly, we expect Open Text will have ECD on to its operating model by the end of FQ1/18, potentially adding $100 mln to $175 mln in FCF per year. All in, we expect the recent financing will provide the base to execute the Company’s M&A strategy. Combined with the Company’s available room on other debt commitments, we believe Open Text has more than enough capacity as it relates to M&A growth.


See the full article.


All-Cap Growth Basket


CCL Industries (CCL.b) – Geoffrey Martin, CEO at CCL Industries, joins BNN’s Greg Bonnell for a look at why CCL made a move to buy U.K.-based Innovia and why he’s not done making deals. CCL shares traded higher by 19% on Tuesday, following announcement of the deal. 


See the full article.



Retirement Corner




Reads of the Week








Economic Reports


Monday December 26th – Canadian and US Markets Closed

Tuesday December 27thCanadian Markets Closed; US S&P Case Shiller Home Price Index, US Consumer Confidence

Wednesday December 28th – US Pending Home Sales

Thursday December 29th – US Initial Jobless Claims

Friday December 30th – US Chicago ISM Index



Earnings Reports


Monday December 26th – Canadian and US Markets Closed

Tuesday December 27thCanadian Markets Closed

Wednesday December 28th – None

Thursday December 29th – None

Friday December 30th – None



Have a good long weekend!

By | 2016-12-23T21:50:19+00:00 December 23rd, 2016|JMRD Updates|0 Comments

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