**March 20th Issue of The JMRD Market Observer**
In This Week’s Market Observer
- Fed Policy Monitor – Fed takes final step toward data dependant forward guidance
- Markets Review – February 2015
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance
- Reads of the week
- Economic Calendar
- Earnings Reports
Fed Policy Monitor- Fed takes final step toward data dependant forward guidance
As widely expected, the Fed tweaked its forward guidance by removing the word “patient” from its statement on Wednesday. Instead the Fed now says that it “judges that an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting” and it “anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium term”. The Fed further added that this change in the forward guidance does not indicate that it has decided on the timing of the initial increase in the target range. There were no dissenters with regards to this decision.
(See Attachment for more details)
Markets Review – February
Investors bought into risk assets during the month, as deal-making activity in Greece, Russia and Ukraine helped fuel a market rally that saw global equities bounce back after a sluggish start to the year.
While fears of a “Grexit” steadily crept back into headlines at the start of 2015, concerns were temporarily alleviated in February as euro zone policymakers agreed to extend financing to Greece for an additional four months. Although fragile, a cease-fire deal between Russia and Ukraine also mitigated risks in Eastern Europe.
Meanwhile, in an attempt to bolster growth, the People’s Bank of China proceeded with another rate cut at the end of the month. The surprise rate cut, which was the second in less than four months, spurred concerns over the state of China’s economy and dampened global growth prospects at large.
In Europe, confidence over the frail situation in the euro zone strengthened in February as the pending start of the European Central Bank’s long-awaited quantitative easing plan helped convince shoppers that they could head back to retail outlets. Consumer prices in the euro zone have been falling for quite some time but deflation pressures have somewhat begun easing, with the latest Consumer Price Index (CPI) figures coming in better-than-expected. On the manufacturing front, Europe’s Purchasing Managers Indices were positive on the whole, with Italy, Ireland and Germany showing signs of promise.
In the U.S., the Federal Reserve (Fed) took a dovish stance on the global economy, with Chairwoman Yellen once again stating that the Fed would remain patient in raising rates. Her testimony before congress revealed that although there may not be any interest rate hikes before summer, the Fed anticipates that the economic environment will improve and will eventually warrant interest rate normalization. While the news was positive for bonds, it wasn’t enough to offset the negative sentiment for this asset class in February.
On the commodities front, although oil closed the month below $50 a barrel, it ended the period slightly higher than it did in January. Considering that prices have been spiraling downward since the latter half of 2014, the reversal prompted some experts to make the case that oil prices may finally be bottoming out. With regards to metals, gold prices declined over the month (despite a short rally at the end of February). Although weaker-than-expected data coming out of the U.S. briefly enhanced investor appetite for the metal, it was not enough to offset declines during the month. Silver prices also fell during the period, despite a similar rebound at the end of the month.
In Canada, while some experts believe 2015 earnings could contract for two of the broad-based equity index’s largest sectors (Financials and Energy), other sectors of the economy (mainly those that are exposed to the U.S. recovery) have seemingly benefitted in the low Canadian dollar environment. Statistics Canada has recently said that the profits of companies outside the Energy and Financials sectors rose to record levels in the last three months of 2014.
(See Attachment for more details)
JMRD Basket Corner
Whitecap Resources – Whitecap reported operating and financial results for the fourth quarter. In our view, the event could be viewed positively by the Street given the slight cash flow beat (production was pre-released). Recall that on March 3rd, Whitecap provided investors with a corporate update. Highlights of the release included: 1) stronger than forecast corporate volumes; 2) an upwardly revised credit facility; and 3) regulatory approval for the much-anticipated waterflood program at Elnora. See attachment.
All Cap Growth Basket
Alimentation Couche Tarde – Couche Tarde reported earnings and announced two separate acquisitions this week. The stock hit a new high of $50.92 after the announcements. See attachment.
Fiera Capital Corp – Fiera Capital reports strong revenues and earnings for fourth quarter and fiscal 2014; increased dividend by 8%. See attachment.
Facebook – Facebook Shares Hit Record Amid Optimism for Ads Business (Bloomberg)
- A Guide to Not Retiring – Some people nearing retirement age simply don’t want to leave their jobs. But defying expectations can be difficult—in the office and at home (Wall Street Journal Online)
Week at a Glance
(See attached Week at a Glance report)
Reads of the Week
- Attack of the Algorithms – (Bloomberg)
- In a World Awash With Crude Oil, Storage Companies Are Kings – (Bloomberg Business)
- FAA allows Amazon to test drones in U.S. (CNN)
- March Madness Makers and Takers (Bloomberg)
- Five Amazing Things We’ve Been Promised ‘Within Five Years’ (Bloomberg)
Monday March 23rd – US Existing Home Sales
Tuesday March 24h – US Inflation, US New Home Sales
Wednesday March 25th – US Durable Goods Orders
Thursday March 26th – US Initial Jobless Claims
Friday March 27th – US GDP, U. of Michigan Consumer Confidence
Monday March 23rd – None
Tuesday March 24h – None
Wednesday March 25th – Dollarama, Legacy Oil + Gas
Thursday March 26th – None
Friday March 27th – Blackberry
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