Issue 4 Friday, January 31st 2014
Last week we wrote about the “January Effect” and this week we will expand on that as both the Dow Jones and S&P 500 have begun 2014 with negative months.
Equities markets in the US fell again last week on the back of weaker than expected manufacturing data out of China (now the world’s second largest economy) and further Emerging Market currency turbulence. The Canadian equity markets were flat again this week and are flat for the month.
As we had mentioned last week, we were cautious about rushing into the US markets as they became extended over the past quarter and we waited for an expected pullback. We had previously added to our international holdings when the market pulled back in September, and this month’s pullback is again presenting what we feel to be better value for investors. Having said that, we are also very aware of the anxiety that any market decline can cause and will exercise patience within the current market environment, but our general feel is that the opportunity to diversify internationally at attractive valuations is at hand.
This week our strategist took a historical look at the January effect back to January 1929, focusing on the February to December period for those years where January was a negative month. What he found was that for the 30 years since 1929 where January was negative, 53% of the time, the remainder of those years showed a positive return for investors. What gives real confidence in this statistic for us, is that in the 47% of the years where markets continued to be negative, 11 of those 14 times the US was in recession. As we are not in a recession currently and our strategist’s leading indicators do not point towards one developing this year, we are viewing the current market pullback of 5% as an opportunity.
Changing topics here a bit, many of our readers will know that we like Infrastructure as investable asset. We came across an article on Bloomberg this week that interested us as it indicated how something a half world away can have a real effect on our Province. A century ago U.S. President Theodore Roosevelt’s gunboat diplomacy made the Panama Canal a reality, changing how global trade was shipped forever. Now new locks and a deeper channel will accommodate ships 25 percent longer and one third wider, making room for much larger cargo ships as well as commodity ships carrying liquefied natural gas as early as 2016. As the energy production throughout the Americas grows the now larger Panama Canal will play an increasingly larger role in the transport of energy supplies globally.
The expansion of the Panama Canal could have some very positive long term economic effects for British Columbia, as we develop out our Liquefied Natural Gas sector and remain one of the busiest Seaports on the west coast of North America. The building of new or expansion of existing energy, coal, and cargo seaports could be expected to provide long term economic stimulus throughout the entire province as demand for engineers, construction and other tradespeople increases.
In conjunction with the infrastructure build out that we expect to see within British Columbia, the energy sector and real estate sectors could also be expected to see strong growth as energy companies increase production to accommodate the increased export capability; the real estate sector should also benefit, especially in Northern British Columbia as towns see an influx of workers.
So while we see improved opportunity internationally right now, we also see strong opportunity and value in owning Canada’s Infrastructure, Energy and Financial Service sectors right now.
Gung Hay Fat Choy. The Chinese Lunar New Year celebrations for the “Year of the Horse” began last night and runs for 15 days. Here are just a few of the events around town that you could make in.
Celebration at the International Village Mall running from January 30 til February 2, is having Lion Dances, a ceremonial eye-dotting ritual and concludes by hosting a cultural extravaganza.
FlyOver Canada will be presenting “Flight of the Dragon” until March 2, where you will fly over the landscape of an ancient civilization and China. However, this event does carry a fee of between $14.95 and $19.95
RCCS New Year celebration at Richmond Centre on February 1st at 1:30 will have lion dancers perform the Choy Ching ceremony.
Dr. Sun yat-Sen Classical Chinese Garden on February 2nd between 10am and 4pm will be hosting a “Hot and Noisy” family friendly event.
VSO: Pacific Rim Celdebration will be February 8th at 7:30pm, where the VSO and maestro Long Yu will conduct a concert that includes Butterfly Lovers Concerto, featuring Chinese violinist Wen Wei. Tickets are available from the VSO and range from $25 to $88.
UBC will also be hosting their Chinese Lunar New Year Celebration on February 7th from 10am to 4pm with lion dances and performances by the UBC Chinese Music Ensemble.
Enjoy the Chinese New Year’s celebrations and have a great weekend. For those of you gathering with friends and family for the Superbowl enjoy the game. Please cheer for Seattle, my playoff pool needs some help.
Thank you for your trust.
As always, we welcome any feedback.
The Dekker Hewett Group