To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 0.3%; the U.S. Dow Jones Index finishing up 0.1%; and the U.S. S&P 500 finishing up 1.7%.
It’s a reasonably brief update this week, with the following summary notes:
- The European Central Bank held rates steady this week, but indicated lower rates and/or a renewed quantitative easing program is coming
- At a reported 206,000 yesterday, jobless claims came in much better than anticipated and again DO NOT confirm recessionary fears
- 2nd Quarter U.S. GDP came in at 2.1%, which was 0.3% better than anticipated (although it slowed notably from the 3.1% Q1 pace)
- Face-to-face U.S./Chinese trade negotiations are set to begin again next Monday… hopefully a positive tone is set
- The U.S. Federal Reserve holds its policy meeting next week, and rates are almost certain to be cut, with the only question being how much? 0.25% or 0.50%? Per my Q2 letter to discretionary clients mailed earlier this week, I believe this anticipated cut by the Fed should be viewed as an “insurance cut”, rather than a cut motivated by immediate recessionary concerns
- Lastly, for discretionary clients, I took some profit on a small amount of Starbucks today and redeployed the proceeds into a bit more Amazon. Starbucks has been, by far, the best performing stock held in client portfolios year-to-date, and surged further today on excellent quarterly results. Amazon has also done very well year-to-date, although it declined a bit more than 1.5% today on a slight quarterly profit miss. It should be noted that Amazon beat expectations with respect to revenue, and the profit miss likely had much to do with the added costs of its expanded move to same day free delivery for its Prime members. The big picture continues to bode very well for this retail disruptor. The opportunity to sell some of a position at a high (Starbucks) and redeploy the proceeds into another position on a simultaneous pullback (Amazon) seemed prudent.
That’s it for this week. All the best,
Nick Scholte, CIM, FCSI
Vice-President & Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
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