The Martens Report - Market Update 3rd Quarter
Hello, We hope you enjoyed your summer and are looking forward to a pleasant fall season. We are writing to give you a brief update on how financial markets have fared over the past few months. Financial markets continued to exhibit a higher degree of volatility than normal throughout the third quarter of 2015, with most equity indexes finishing the period with losses and the results for bond markets being mixed. Equity values declined in late August and remained choppy into the end of September due to a number of factors, including China’s decision to devalue its currency and a subsequent sell-off of Chinese stocks, slower global growth and uncertainty surrounding the U.S. Federal Reserve’s plans to raise interest rates. By quarter-end, the S&P 500 Index in the U.S. had rebounded slightly to post a 6.4% loss for the three-month period and a 5.3% decline for the year-to-date, while the MSCI World Index was down 8.3% for the quarter and 5.6% for the first nine months of the year, both in U.S. dollar terms. For Canadian investors, however, the weak global market results were mitigated as the Canadian dollar continued to lose value relative to the U.S. dollar and other major currencies. In Canadian dollar terms, the S&P 500 was up slightly for the quarter and up 9.4% for the year-to-date, while the decline in the MSCI World Index was trimmed to 1.6% for the quarter and it posted a positive 9.0% return for the first nine months of the year. The benchmark Canadian S&P/TSX Composite Index, meanwhile, continued to underperform other developed markets, with its resource-oriented sectors impacted by softer global demand for commodities. The index dropped 7.9% in the third quarter and was down 7.0% in the first nine months of the year. Given the equity market uncertainty and in light of weaker economic conditions, central bankers exercised caution throughout the quarter. The U.S. Federal Reserve opted to keep its benchmark interest rate unchanged, in spite of evidence that the American economy continues on a path of modest growth and its stated goal to raise rates in the near future. In Canada, soft commodity prices continued to weigh on the economy, and two consecutive quarters of declining GDP prompted the Bank of Canada to cut its lending rate to 0.5% in July. Yields for developed market government bonds declined slightly through the quarter as investors sought out their perceived safety. Heightened market volatility can be unsettling, but we know that financial markets cycle through periods of stronger and weaker returns. Market pullbacks often provide opportunities for investors to buy high-quality securities at attractive prices, and can help to build value over time. Although the underlying global economy still faces challenges, it continues to grow slowly. In the U.S., the economy expanded at an impressive annual rate of 3.9% in the second quarter of this year, corporate earnings are strong and the housing and job markets are stable. Early third quarter data indicate that the Canadian economy has also returned to positive growth. Overseas, the rising U.S. dollar is putting pressure on emerging economies, but China’s economy is still expanding – albeit at a slower rate – as are many developed economies including Germany and France. From a longer-term perspective, it is worthwhile to note that most equity markets have been strongly positive over the last five years. For example, the five-year compound annual return (to September 30, 2015) for the MSCI World Index was nearly 9% in U.S. dollars and 15% in Canadian dollar terms. While we cannot predict how markets will behave in the future, the danger in reacting to the weakness of this most recent period is that you may miss a subsequent rebound. It’s important to remember that market volatility was taken into account when we developed your investment portfolio. A sound financial plan that includes a well-diversified investment program tailored to your individual objectives remains the best approach for securing your financial goals. Should you have any questions about your investment portfolio and we are here to help. Please do not hesitate to contact our office if you would like to discuss. Sincerely, Andrew & Peter
The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. The message is intended only for the use of the intended recipient(s). It is confidential and may also be privileged and/or exempt from disclosure under applicable law. If you are not the intended recipient(s), you are hereby notified that any review, retransmission, conversion to hard copy, copying, circulation or other use of this message is strictly prohibited and may be illegal. If you are not the intended recipient(s), or have received this message in error, please notify the sender immediately by return E-mail and delete this message. This newsletter was prepared solely by Peter and Andrew Martens who are registered representatives of HollisWealth Advisory Services Inc. (a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation). The views and opinions, including any recommendations, expressed in this newsletter are those of Peter and Andrew Martens only and they have not been reviewed or approved by HollisWealth Advisory Services Inc. TM Trademark of The Bank of Nova Scotia, used under license. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. PLEASE BE ADVISED THAT TRADING INSTRUCTIONS SHOULD NOT BE COMMUNICATED VIA E-MAIL, AND IF RECEIVED WILL NOT BE ACTED UPON. Without the use of secure encryption, the Internet is not a secure medium and privacy cannot be ensured. Internet e-mail is vulnerable to interception and forging. HollisWealth Inc. cannot ensure the privacy and authenticity of any information, and will not accept any instructions, that you send to us over the Internet. HollisWealth Inc. will not be responsible for any damages you may incur if you communicate confidential information to us over the Internet or if we communicate such information to you at your request HollisWealthTM is a trade name of HollisWealth Advisory Services Inc. and HollisWealth Insurance Agency Ltd. Mutual fund products provided by HollisWealth are provided through HollisWealth Advisory Services Inc. (a member of the Mutual Fund Dealers Association of Canada and the MFDA Investor Protection Corporation). Insurance products provided by HollisWealth are provided through HollisWealth Insurance Agency Ltd. ™ Trademark of The Bank of Nova Scotia, used under licence.