To my clients:

NOTE: I’ll be working a shortened day next Friday, February 14th and leaving mid-morning (road trip to Kamloops for a volleyball tournament for my daughter). There will be no update next week.

It was an up week for North American stock markets with the Canadian TSX finishing up 0.2%; the U.S. Dow Jones Index up 0.6%; and the U.S. S&P 500 up 1.5%.

Short point form update again (I hope to put together more narrative oriented updates once annual review begin slowing down approximately mid-March):

- To reiterate once again, policy initiatives from south of the border continue to drive volatility in markets, and I don’t expect this to materially change for the duration of Trump’s presidency. That said, in aggregate, the policies tend towards pro U.S. growth and this should continue to bode well for markets unless, or until, inflation begins to ratchet up again.

- On inflation, indeed data this week showed it did tick up month-over-month with the headline annualized rate again registering a “3” as the first digit (albeit just barely at 3.0%).

- Owing to continued strength of the economy, and with a nod toward possibly renewed inflation pressures, U.S. Federal reserve Chairman Jerome Powell this week said that the Fed is in no hurry to reduce rates further.

- With respect to continued economic strength in the U.S., it’s no surprise that the derivative consequence of this growth is strong U.S. corporate profits – corporate profits are leveraged to growth in the economy. The current quarter is tracking well ahead of forecasts on the corporate profit front. And don’t forget, at the end of the day (i.e. over the extended long-term) it is growth in corporate profitability that drives stock markets higher.

- I’ll likely be implementing a further modest shift toward increased U.S. exposure and decreased Canadian exposure over the next week.

That’s it for this week. Have a good long weekend!  Next update in two weeks.

All the best,

Nick

Nick Scholte, CIM, FCSI

Senior Portfolio Manager

Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
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