This week we rang in the Chinese New Year, and have entered the year of the Sheep (or Goat). Chinese New Year is the longest national holiday in China, spanning a total of fifteen days, and New Year’s Day is the most important date in their calendar. Gong Hey Fat Choy.
With this week being a shortened week due to the President’s Day holiday in the United States, we have seen a relatively quiet week regarding economic news. This week’s news out of the FOMC and Greece reminds us that investors must always tussle with events that are outside their control. These news events remind us that the current moment presents more conundrums than almost any other time since the financial crisis. Place on top of this the recent decline in oil prices and a rapidly appreciating US Dollar and we see quite a crosswind in the global capital markets. The point is that at times like this, sometimes the best thing to do is nothing.
The fact that no agreement has yet to be struck between European and Greek finance ministers explains why the equity markets have been in very much of a holding pattern recently. Separately, the minutes from the January FOMC meeting reveal that they are set to remain patient on raising rates and are more willing to wait for concrete evidence of a turnaround in inflation and global growth. Following this, the market is now forecasting that the first rate increase by the Federal Reserve will not be until October, versus June as was overwhelmingly expected. This shift is also expected to bring about increased levels of volatility in both the equity and fixed income markets.
Regarding economic statistics this week, in Canada, we learned that retail sales actually declined in December much more than expected. Lower gasoline sales accounted for a large percentage of this decline, but we also saw a modest decline in 9 of the other 11 retail subsectors. Obviously, a further softening of economic data here in Canada as we get closer to the next Bank of Canada central bank meeting does raise the odds that we could see another rate cut. This is worrisome as it could prompt another swift drop in the value of our currency by a few cents. Next week we await inflation statistics here at home, which should be expected to provide us with a clearer picture of what to expect from our central bank on March 4th.
However, on the bright side, both Japan and Europe are continuing to show signs of economic improvement with month over month manufacturing and economic sentiment indicators, leading us to believe that both Bank of Japan and European Central Bank are unlikely to stop reflating their economies anytime soon. While the reflation of these regions will not be exactly like that of the United States, nor do we expect it to be, it does give us an indication as to what we could expect over the next few years.
Many of our readers may recall that we have mentioned the iShares MSCI EAFE Index ETF (currency hedged) as well the First Asset Low Risk Europe ETF over the past few months and we continue to see lower volatility ETFs as the best way to increasingly take advantage of the expected economic reflation and growth of both Europe and Japan over the next few years.
Join us for the launch of Canaccord Genuity GPS Optimized Portfolios – and learn how to take control of market volatility in your investment portfolio.
Given the recent volatility in the markets, our Optimized Portfolios, part of
Canaccord Genuity Global Portfolio Solutions (GPS) are a timely solution.
The award-winning, proprietary process behind our GPS Optimized Portfolios
aims to cap volatility and reduce the potential for capital loss to provide you with steadier returns and more certainty. In other words, returns include peace of mind.
The Dekker Hewett Group is pleased to invite you to this exclusive event.
With over 60 years of combined investment management experience, we are
confident that this innovative investment solution – now available in Canada
for the first time – can give you a powerful tool for protecting your capital.
We hope to see you there.
Wednesday, March 3, 2015 Wednesday, March 4, 2015
5:30 p.m. Registration l 8:00 a.m. Breakfast Presentation
6:30 p.m. Presentation begins l Hawksworth Restaurant
Four Seasons Hotel l Hotel Georgia
Downtown Vancouver l Downtown Vancouver
Seating is limited.
We thank you for the privilege you have bestowed upon us with taking care of you and your family. We thank you for that trust.
As always, we welcome your feedback. Have a great weekend.
The Dekker Hewett Group