Market Watch for November 25, 2016

Global Portfolio Advisory Group

November 25, 2016

Big Picture

U.S., Europe show strength

It was a relatively quiet week with few surprises but there was still plenty of market moving news and developments to keep traders busy. In the U.S., economic data continued to be positive led by October orders for durable goods which rose 4.8%. That nearly doubled expectations and points to growing stabilization in the factory sector. Meantime, consumer confidence has surged since the presidential election as the University of Michigan sentiment survey rose to 98.3 from a preliminary November read of 91.6 and a final October reading of 87.2. Also in the U.S., Fed minutes from their meeting held three weeks ago were released Wednesday. The minutes largely confirmed expectations that a rate rise could be coming at the bank’s December 13-14 meeting. In Europe, business activity expanded the most in nearly a year in November according to a composite purchasing managers’ index released Wednesday.

The index jumped to 54.1 from 53.3 in October which puts it at its highest level all year; any read above 50 signals economic expansion. In commodities news, the likelihood of a global oil production cut rose and fell this week in advance of key meetings starting Monday among OPEC and other major producers. Russia, Iran and Iraq said they were willing to debate cuts earlier in the week but were having second thoughts by Thursday. Turning to Canada, retail sales rose 0.6% in September in an early sign the Liberal’s fiscal stimulus plan is lifting domestic demand. It was July when the Trudeau government started sending cheques to families with young children and an uptick in sales data had been expected. Looking ahead, Statscan releases Canadian GDP data for September and the third quarter next week.

Markets

U.S. stocks notch records

Major U.S. stock indexes closed in record territory (Dow, S&P 500 and Nasdaq) Wednesday in advance of Thanksgiving Day celebrations Thursday and an abbreviated trading day Friday. The TSX hit multi-year highs this week as well. For the four days covered in this report, the Dow rose 216 pts. to close at 19, 083, the S&P 500 jumped 23 pts. to finish at 2,204 and the Nasdaq ended 79 pts. higher at 5,380.  In Canada, the TSX ended up 211 pts. to settle at 15,075.

Equities/Strategy

Tax Loss Selling

With the calendar year‐end fast approaching, this is an opportune time for investors to identify positions currently trading at a loss that may be sold for tax purposes. The task is made more challenging this year by the positive performance of equity markets in, among other regions, Canada and the U.S. – though we are the first to acknowledge positive returns, potential tax consequences notwithstanding, are more favourable than the alternative! At this juncture our investment strategy of remaining overweight equities / underweight fixed income with a bias toward cyclical sectors remains valid. However, it implies a more cautious approach is warranted in respect of defensive sectors, and we also note our enthusiasm for international and emerging market assets has waned in light of protectionist trade risks in the year ahead. Tax loss selling may provide an opportunity to reposition portfolios consistent with our outlook and investors’ long-term investment goals.

This material does not include or constitute an investment recommendation, and is not intended to take into account the particular investment objectives, financial conditions, or needs of individual clients. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor.

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