More Upside / If needed / $1.4 trillion in excess
Equity markets stable this week as we start US earnings season. After a great start overall profits are no longer expected to decline.
Positives: Jim Paulson comments– “the combination of fear, room in valuations and accommodative central bank policies are setting up the market for even more upside in this year’s second half - defensives have been strong - cyclicals will rise next - material, capital and labor costs are dropping - margins are improving, retail sales increasing, layoffs low, a lot of public policy stimulus, companies increasing dividends, employment good, ISM improving, capital goods up year-over-year and businesses confident of the future.” Fed decided to not cut rates but indicated that it would do so if needed helping to drive US market to all-time highs. China’s stimulus package on its way. “Fed data dependent has changed in the last six weeks as personal income and spending strong, income grew, nonfarm payrolls increased, initial unemployment claims remain near historic low levels and auto sales beat consensus. There is no sign of disinflation and certainly not deflation. Q2 GDP growth expected 1.5 to 2% range. New data will not show any significant slowdown in the US economy.” (Brian Wesbury.) FED is not tight there is still $1.4 trillion in excess reserves in the bank system. Global central banks action - Bank of Korea and Indonesia cut interest rates acting to shore up economies. Canada inflation dips in June heading to Central Bank target. Summer market volume is low, people are on vacation- enjoy it. Seasonality suggest that the markets can often be volatile until late October- this offers bargains and buy opportunities. ECB follows the Fed and considering stimulus through rate cuts on its bond buying program.
Negatives: Our economy is split and into two, on one side consumer economy is doing fantastic but on the other side the business economy is falling apart- that’s why he wants the Fed to pay close attention( J Cramer). US and China are still far away from reaching tariff agreement. Global economic data still weak. US treasury yield curve still slightly inverted. Fading fiscal stimulus. “Europe - do you really think the Fed can fix low economic growth caused by the socialistic policies across the sea - high taxes, regulations and spending can’t be fixed by the ECB negative rates so how can the Fed think it can help - is a mystery.”(B. Wesbury). It’s about housing - home building in the US declined in June. Analysts expect Q2 to reveal US profits recession and China’s economy grew at its slowest pace since 1992.
Investment Wisdom: “If you aren't thinking about owning a stock for ten years, don't even think about owning it for ten minutes.” -Warren Buffett
PORTFOLIO MANAGEMENT–Week’s Highlights
Stocks of the Day: MSFT, BNS, WCN, CP, OTEX
Have a great weekend. Bruce
MacKay Weekly Investment Report Contents:
Page 1 - How I see It
Pages 2 & 3 - Notes and Quotes
Page 4 - CDN Mkts
Page 5 – Int’l Mkts
Page 6- Funds & ETFs
Page 7-9 – Favourite Charts
Page 10 – MacKay Group Portfolio Management
Page 11 – Comprehensive Wealth Management
Page 12 – MacKay Group News & Events