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It-s-Your-Life

Weakening global growth worries

The Big Picture

Growth worries persist

Worries about weakening global growth and its potential impact on the US economic recovery roiled markets around the globe this week. Europe continues to be the primary source of concern as most economic indicators have turned down since mid-summer. The most recent piece of bad news came Tuesday when Germany – the eurozone’s largest economy – cut its growth outlook for 2014 from 1.8% to 1.2% and reduced its 2015 projection from 2.0% to 1.3%. In addition to paring back German growth estimates, there has been no pick-up in the country’s level of inflation which remained unchanged from August to September at 0.8%. The combination of falling growth and a lack of inflation has plagued much of the eurozone and news that its strongest country may succumb to the same ills rattled traders on both sides of the Atlantic. They’re worried about the impact a decelerating Europe would have on a still scuffling US economy especially in light of halting Chinese growth. A string of poor economic reports out of the US Wednesday added to the down beat mood as retail sales fell, the producer price index disappointed and a business conditions survey dropped. Two positives came Thursday in the form of US jobless benefits claims which came in at a 14-year low and industrial output which sharply rose. The dose of good news seemed to remind traders that the US economy is moving in the right direction and a sense of calm returned to the markets late Thursday. Traders also seemed to notice US Q3 corporate earnings ahead of the weekend which have been pretty decent with 65% of the companies beating estimates thus far.

 

Markets

Stocks stabilize

North American stocks stabilized late in the week following another wild couple of days filled with sharp ups and downs. For the four-day period covered in this report, the Dow fell 418 pts. to close at 16,117, the S&P 500 gave back 43 pts. to close at 1,862 and the Nasdaq shed 63 pts. to finish at 4,217. In Canada, the TSX lost 175 pts. to end Thursday’s session at 14,052.

 

Our Recommendations

Higher volatility returns

Equities - Warren Hastings, Associate Director, Portfolio Advisory Group wrote: “The week was characterized by a notable return in volatility. This week, through Thursday’s close, the S&P 500 declined 2.3% in USD terms while the S&P/TSX fell 1.2% (CAD). The declines mirrored a 3.6% decline in crude oil prices following reports Saudi Arabia was considering a volume over price strategy in respect of its oil exports. Equity volatility, as measured by the CBOE Volatility Index, spiked, closing at 26.25 on Oct. 15, the highest since 2012, and the same day the US 10-year Treasury yield declined to 2.14% -- a level not seen mid-2013. The sell-off created several attractive buying opportunities in the Canadian equity market, in our view, including select financial, energy producer, and energy infrastructure names.”

 

All performance data represents past performance and is not indicative of future performance. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author is an employee of ScotiaMcLeod, a division of Scotia Capital Inc. (“SCI”), but the data selection, analysis and views expressed herein are solely those of the author and not those of SCI. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor SCI can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your investment advisor, who can assess all relevant particulars of any proposed investment or transaction. SCI and the author accept no liability of whatsoever kind for any damages or losses incurred by you as a result of reliance upon or use of this publication in contravention of this notice. ® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod. ScotiaMcLeod is a division of Scotia Capital Inc. ("SCI"). SCI is a member of the Investment Industry Regulatory Organization of Canada and the Canadian Investor Protection Fund. 

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Jeff Stathopulos, CIM, CFP, Portfolio Manager

Jeff is an advisor and partner with The Navigation Team at Scotia Wealth Management.

He lives in Kelowna with his wife Tanya, their two university bound daughters and their canine kids.

You can contact Jeff by email at [email protected]

Website:  www.yourlifeyourplan.ca

The Navigation Team

Scotia Wealth Management

This column is for information purposes only. It is recommended that individuals consult with their financial advisor before acting on any information contained in this article. The opinions stated are those of the author and not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member Canadian Investor Protection Fund.



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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