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Money Advisor Wealth Management

Money Advisor Wealth Management

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Market Commentary – November 2015

With the arrival of September 30th statements in the mail, and the questions surrounding them I have included some commentary from one of our portfolio managers at Guardian Capital to get her perspective on the markets.

Your account values at the end of September show an ugly 3rd quarter. Most accounts have rebounded sharply in October and if you follow your accounts online, you will have noticed this. I am happy to discuss your statements with you if you wish!

From Christie Rose CFA, Guardian Capital:
We have just experienced the first correction in four years. It feels like the markets have bottomed on the last day of September, just in time for us to take a picture of the potential bottom and generate statements as at that date.  I can tell you we have had a nice bounce off the bottom… and I am feeling that September 30, 2015 may have been the bottom of the first market correction since 2011 – which also bottomed on September 30 of 2011.
 Recently, something has been changing within the markets.  Value is outperforming growth, emerging market stocks have been outperforming developed markets, U.S. dollar is weakening, energy prices have been moving higher, and U.S. stocks with heavy Asian exposure have started to outperform. All of this simply means is that there is a return to more positive performance from the markets.
Over the last year we have faced a few primary boughs of volatility. The first was caused by a collapse of energy prices followed by the first correction in the broad markets in over four years. This correction was intensified due to concern of how much of a slowdown was really being experienced in the Chinese economy. The Chinese economy is extremely important to the stock market since it is the single largest driver of projected global growth over the next 15 years. Obviously, any news that is asserting weakness in this projection will cause increased market volatility. A decrease in the growth projection is now priced into the markets. In the end, the Chinese economy is still home to the greatest projected future growth in our global economy. It is not in a recession, it is slowing from super unsustainable growth to a number even more logical for us to understand. Recently there is increased evidence that data from China, both public and private, has become incrementally better.  These moves signal better global growth ahead.
The energy sector continues to struggle in delivering a recovery. Looking at past market bottoms in oil to provide a guide on how this will play out is very difficult. The only positive we are seeing is that short term technicals are showing favorably oversold conditions. The longer term fundamentals remain negative. Based on historical patterns for the Energy sector’s relative performance following major oil price bottoms is to base for a few months (where we are now), follow with a sharp rally, and then fade. The current cycle’s decline in relation to history has been proving to be both deeper and longer as hydraulic fracking and increased drilling rig efficiency has permanently reshaped the energy landscape.
Global growth is best described as moderate, the markets are benefiting from increased mergers and acquisitions both in and outside of Canada. In addition, we continue to benefit from a low interest rate environment. Not long ago there was concern that the Federal Reserve in the U.S. would follow through and raise interest rates, but this has not materialized. The global monetary bodies continue to be very accommodative of maintaining simulative monetary policy, however, we are anticipating a reduction in monetary easing by the U.S. and U.K. monetary bodies. Recently, inflation expectations have fallen that much lower. This is logical given that inflation continues to be at the lowest levels; regardless of years of accommodative monetary policy. While there has been some upward pressure on energy and commodity prices, they also remain in their lower range which will be to the benefit of global growth.

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