Market Watch Weekly - December 6, 2013

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This week the world lost a man many would consider to be one of the greatest leaders of our time. Nelson Mandela spelled out a vision for South Africa free of the racial divisions that had splintered the nation during 46 years of segregationist rule. He died at the age of 95.

The recent global economic downturn started late in Canada and its effect has been more moderate than in other countries. The outlook for Canada’s economy continues to improve as world trade and growth in the United States continues to recover. A key driver of activity will be rising exports, with Canada well-placed to take advantage of growing demand for commodities in emerging markets.

Infrastructure goods drive an economy’s productive capacity, and in Canada’s case, they are also an important contributor to both our current and projected future trade volumes. In a note that James Emmet, HSBC Global Head of Trade and Receivable Finance, put out to clients the other day he stated,

“The investment countries are making in infrastructure is phenomenal and provides a huge opportunity for businesses looking to grow and develop. Rising middle classes across Asia’s rapidly emerging markets will drive significant infrastructure demand in the region. As China looks to scale the value chain in terms of goods it manufactures, there is a strong opportunity for developed economies to supply sophisticated investment equipment to the country’s producers. We expect infrastructure-related goods to increase their share of rising global trade, providing strong opportunities across both developed and emerging economies for exporters and importers of those goods and the merchandise that can be manufactured as a result.”

Our own North American strategist, Martin Roberge, has echoed such comments in his most recent monthly strategy report where he discussed a growing breadth of economic momentum globally. Recent leading economic indicators have been progressively driven more from economic factors as opposed to the financial (central bank) forces recently. This development bodes well for future global trade and GDP reports.

Economists at both Goldman Sachs and Deutsche Bank commented in their recent client notes that the relaxation of the growth being driven by financial forces will help industrial economies nearly double their rate of economic expansion next year, the most since the recovery from recession in 2010. In Europe, signs that the so-called peripheral economies such as Spain and Greece are getting more control over their budgets has helped reduce the “risk premium” attached to Europe over the past few quarters as well. It may take until 2015 for the fiscal drag on Europe to more fully diminish, but similar to the conditions we saw within the S&P 500 in 2010, we are now seeing within the European markets today.

We began adding US assets for clients slowly over the past year and continue to talk with our readers about adding the appropriate US economic assets within your portfolio. This week we also began evaluating the ETF and actively managed fund options covering both Europe and the Emerging Markets and you can expect to see increased commentary with respect to Europe and the Emerging markets in the near future.

This week we have seen near record cold weather hit the much of the province, and in particular the lower mainland.

The annual average temperature in Vancouver is 11 degrees Celsius. Despite these normally mild winters resulting from the onshore flow over the North Pacific Current, occasionally an arctic outflow occurs, resulting in much lower than normal temperatures for approximately a week. In an extreme case these artic outflows remain in place for extended periods, such as in 1950. During the month of January 1950 the average temperature for the entire month was -9.7 °C.

For those of you with pets, we would suggest that you keep them indoors this weekend, as we do expect it to get down to nearly -10°C overnight tonight.

Have a great weekend.

As always, your feedback is welcomed and encouraged.

The Dekker Hewett Group

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