**June 3rd Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer Market
- JMRD Congratulates Melanie McCann on qualifying for the 2016 Summer Olympics!
- NBF Asset Allocation Strategy: A Brexit or Hike Surprise in June?
- NBF Forex: Will Slowing Labour market deter the Fed?
- JMRD Basket Corner
- Week at a Glance
- Reads of the Week
- Economic Calendar
- Earnings Reports
JMRD Congratulates Melanie McCann on qualifying for the 2016 Summer Olympics!
JMRD Wealth Management would like to extend its congratulations to Modern Pentathlete Melanie McCann on qualifying for the 2016 Summer Olympics in Rio De Janeiro, Brazil.
Melanie is a good friend of our Team and some of our clients will remember her from a few of our events leading up to her successful qualification for the London Summer Olympics.
Melanie’s competition will take place August 19-20 in Rio. This will be McCann’s second Olympic Games as she represented Canada at the 2012 Olympics in London, England where she placed 11th out of 36 competitors – a record best for a Canadian Pentathlete. The Modern Pentathlon is composed of five sports: Fencing, swimming, riding and a combined shoot (laser pistol) and run to finish off the event. Modern Pentathlon is said to “define the most all around sportsman”.
Some of us attended her competition in Toronto in 2015 at the Pan Am Games and can assure you it is quite a grind.
Melanie has been a member of the National Team since 2007 and has enjoyed great success. She trains diligently every week spending three days a week practicing her fencing, six days a week practicing her swimming, two days a week practicing her riding, five days a week practicing her running and four days a week practicing her shooting.
Melanie was raised in Mount Carmel, Ontario with her siblings Blair, Lisa and Josie, and currently resides and trains in Ottawa, Ontario. She is the second oldest for her parents Brian and Jayne McCann. We had the pleasure of working with her sister Josie here at JMRD from April of 2014 to March of 2015.
JMRD wishes Melanie all the best at the 2016 Olympic Games, we know she’ll make us proud!
Shown is Melanie giving a look into all five sports she competes in.
NBF Asset allocation strategy: A Brexit or hike surprise in June?
- The FOMC’s complicated relationship with market expectations continues and the probabilities of tightening have certainly increased when Chair Yellen said it would be appropriate “for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months.”
- While most of the global risks dogging the markets at the end of 2015 and beginning of 2016 seem to have subsided (Yuan, crude oil prices and credit spreads), a hike in June would be ill-timed as China is struggling to generate some momentum and the EU has to contend with the uncertainty generated by a Brexit vote.
- Brexit: Even is the ‘remain’ camp appears to be slightly ahead in the polls, they lead by only a small margin and, at this point, it remains a coin toss. We think volatility regarding the Euro and stock markets would dramatically increase if the ‘leave’ camp gains some steam ahead of the June 23 vote.
- Even though we are past the recent highs, we believe the Canadian dollar has limited upside for now, and that investors should wait for better levels before adding to their hedge positions.
- On crude oil, we think $50 will prove too much of a resistance to justify further appreciation in the near future.
- The S&P 500 is also hitting resistance levels, while its financial ratios have now reverted to levels witnessed before the corrections.
- Before the next leg up, companies will have to show some form of earnings growth, and that has proven difficult to achieve in recent months.
(Full report attached)
Will slowing US labour market deter the Fed?
- Based on its latest meeting minutes and recent speeches by its Governors, the Fed seems keen to raise interest rates this summer. Its concerns about low interest rates for too long threatening the stability of financial markets (via asset bubbles and risky behaviour) are valid to some extent. But international developments may restrain the FOMC’s abilities to hike. Even assuming Brexit is avoided after the June 23rd referendum in the UK, more stimuli can be expected from both the European Central Bank and the Bank of Japan, which would likely to push the US dollar higher and tighten financial conditions in the US. Moreover, domestic US economic conditions may not be conducive to tighter policy. The observed labour market acceleration over the last couple of months is a worrying trend, albeit not surprising to us considering weak corporate profits and poor productivity in the US. Our view that the USD will temporarily be losing steam against other major currencies over the next few months is based on the assumption the Fed will delay rate hikes to the last quarter of the year.
- While the euro and yen could make gains against the USD over the next couple of months, they should remain vulnerable to loose central bank policies over the longer term as both the Eurozone and Japan grapple with tepid economic growth and the persistent threat of deflation.
- If, as we expect, the Fed is unable to hike in the summer, the Canadian dollar and commodities could get a lift over the near term. But given the large current account deficit and hence the dependence of foreign capital flows, a sudden C$ depreciation cannot be ruled out, more so if there is a negative turn in sentiment about Canada’s economic prospects. We expect USDCAD to be in the 1.25-1.35 trading range over the next 12 months.
(Full report attached)
JMRD Basket Corner
Hydro One (H) – “Hydro One CEO on infrastructure: ‘There’s no doubt the system is in decline’” (Globe and Mail)
TransCanada (TRP) – “TransCanada Unshackled by Keystone Weight Makes Stock Comeback” (Bloomberg)
All-Cap Growth Basket
Alimentation Couche-Tard (ATD.b) – “Couche-Tard, 7-Eleven parent vying for CST Brands: report” (Globe and Mail)
U.S. Growth Basket
Broadcom (AVGO) – Chipmaker Broadcom’s adjusted 2Q EPS beats consensus as sales are in line, and projections for 3Q sales top analyst estimates. “We are expecting a robust third quarter, led by strong growth in wireless revenue, and continued strength in wired networking,” says CEO Hock Tan. AVGO is an Apple (AAPL) supplier, sensitive to iPhone production cuts, and MKM analyst Ian Ing tells WSJ that 2Q showed weakness in wireless and enterprise storage but were offset by wire-line revenue he characterizes as “strong.” Broadcom, formerly known as Avago (thus the AVGO symbol), is the product of a $37B combination of the two chipmakers, and this is the first quarterly report to reflect the combined businesses. AVGO traded higher by 5.5% on Friday to a new year-high of $163.25
1) “Seniors, keep your money safe from your children” (Globe and Mail)
2) “Expanding CPP may not help most vulnerable retirees” (Globe and Mail)
Week At A Glance
(Full report attached)
Reads of the Week
- “20 Common Investing Mistakes: Be sure you set a plan and don’t let emotions steer you off course” (Morningstar)
- “Ultimate Stock-Pickers: Top 10 Buys and Sells” (Morningstar)
- “A suburban experiment aims for free energy” (New York Times)
Monday June 6th – None
Tuesday June 7th – U.S. Consumer Credit, U.S. Productivity Revised
Wednesday June 8th – Canadian Housing Starts, Canadian Building Permits
Thursday June 9th – Canadian Capacity Utilization, Canadian New Housing Price Index, U.S. Wholesale Sales
Friday June 10th – Canadian Unemployment Change, Canadian Unemployment Rate, U of Michigan Sentiment
Monday June 6th – None
Tuesday June 7th – Valeant Pharmaceuticals
Wednesday June 8th – Dollarama, North West Co
Thursday June 9th – None
Friday June 10th – Transcontinental
Have a good weekend!