**June 12th Issue of The JMRD Market Observer**
In This Week’s JMRD Market Observer
- NBF Economics and Strategy Report – Warnings of Canadian housing overvaluation are overblown
- Markets’ Review – May 2015
- Multiple Asset Class (MAC) Basket Update – May 2015
- JMRD Basket Corner
- Retirement Corner
- Week at a Glance
- Reads of the week
NBF Economics and Strategy Report – Warnings of Canadian housing overvaluation are overblown
- Pessimistic views of the Canadian housing market have been getting more and more airtime. In our own view, the overvaluation that some see is either overblown, when based on comparison of the price-to-disposable-income ratio with the 45-year average of that ratio, or downright far-fetched, when based on a similar historical comparison of the price-to-rent ratio calculated from the underestimated rents of the Consumer Price Index.
- In our view, the catch-up of home prices in Canada since 2000 is attributable to the vigour of the labour market in an environment of sharply lower interest rates. The Canadian housing market is further buoyed by very strong population growth due to strong net in-migration.
- If the Bank of Canada policy rate were to rise to the Bank’s estimated neutral point by 2018, affordability would remain within the range of recent years. If it rises to the lower rate anticipated by the financial markets, affordability could be fairly stable out to that horizon. Assuming the labour market holds up, these scenarios do not portend a correction of home prices.
(Full Special Report attached)
Markets’ Review – May 2015
- Greece’s finances were yet again brought to question in the month of May, as investors weighed the prospects of a sovereign default. Greece faces a potential exit from the euro zone if it fails to meet obligations on €1.6 billion worth of debt in June. On that note, fears of a “Grexit” contributed to mixed performances on the equity and bond front during the month.
- Sluggish data out of the U.S. also dominated headlines and led some investors to push back their expectations for rate hikes by the U.S. Federal Reserve (Fed). These concerns, however, were somewhat tempered by Fed Chair Janet Yellen, who reassured markets by saying it would be “appropriate at some point this year” to increase the federal funds rate if the economy continues to show improvement.
- Here at home, the Bank of Canada kept rates unchanged at 0.75% despite lacklustre data that indicated the Canadian economy stalled in the first quarter. The central bank also expressed concern over the implications of slower growth south of the border, given Canada’s reliance on the U.S. economy. However, the bank’s Governor Stephen Poloz believes Canada will rebound soon, eliminating the need for further stimulus measures going forward.
(Full report attached)
Multiple Asset Class (MAC) Basket Update – May 2015
We have featured this Basket in past Market Observers and we will continue to do so into the future. Last week we had the chance to catch up in-person with a member of the management team, Ralph Hartmann, and he provided his thoughts on how the Basket will be positioned for the next 6-8 months. Please see the attached for more information.
JMRD Basket Corner
Dollarama (DOL) – Dollarama Inc beats profit estimates by packing shoppers’ baskets with products priced above a buck (National Post)
All Cap Basket
Sun Life Financial (SLF) – ‘One heck of a machine’: Sun Life’s CEO confident in lifeco’s outlook — regardless of when rates rise (Financial Post)
U.S. Growth Basket
L Brands (LB) – The Long serving Fortune CEO is a Bra Salesman – (Fortune)
Nike (NKE) – Nike announced an eight-year global merchandising and marketing partnership that will make NIKE the official on court apparel provider beginning with the 2017-18 NBA season. “This partnership with NIKE represents a new paradigm in the structure of our global merchandising business,” said NBA Commissioner Adam Silver. “As our exclusive on court apparel provider, NIKE will be instrumental in our collective efforts to grow the game globally while applying the latest in technology to the design of our uniforms and on court products.”
Apple (AAPL) – This week, Apple held its Worldwide Developer Conference 2015 event in San Francisco. The company announced significant updates to its iPhone/iPad software in iOS 9, a new Mac OS, El Capitan, a new Apple Watch OS, a new music streaming service, as well as updates to its Apple Pay rollout. We believe Apple’s strong and growing feature set continues to demonstrate integration between mobile devices and PCs and highlights a competitive advantage in broader compute that neither Android nor Windows can emulate. This, combined with a loyal developer community, remains Apple’s core competitive advantage. In a multi-device world, Apple is substantially better positioned than its peers as its vertically integrated structure allows it to simultaneously win market across all major fronts of the compute market – PCs, tablets, smartphones, and now wearables – and to effectively create and maintain advantages. See Attached Report. Apple Inc.
- What every high-school grad should think about: retirement (The Globe and Mail)
Week at a Glance
(See attached Week at a Glance report)
Reads of the Week
- Global investing is changing (Richard Bernstein)
- Ten Canadian CEO’s who own the most shares in their companies (The Globe and Mail)
- Canadians are in better financial shape than the pessimists think (The Globe and Mail)
- The Future of Computers Is the Mind of a Toddler (Bloomberg)
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Have a good weekend!