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Shane Harboun

Weekly market close

Many experts agree that low interest rates are a key factor in putting a sluggish economy back on its feet. Low interest rates allow banks to borrow for close to nothing and this allows them to lend at lower rates- stimulating growth. While all that is fairly accurate, the downsides of a low interest environment are often ignored, and this week we have seen a glimpse of the implications that run along with extended cheap credit markets.Canadian marketsThe TSX is down 1.06% for the week, as two important Insurance companies, Manulife Financial (TSE:MFC) and Sunlife Financial (TSE:SLF) both reported net losses, moving them down 5.86% and 2.75% respectively. Management explained that these losses were attributable to the Bank of Canada’s decision to keep interest rates low, and their effect on an insurance company’s investments. Insurance companies commonly invest in bonds and other fixed payment securities to cover potential situations where loss ratios could be above 100%. The loss ratio calculates the profitability of the insurance company based on their core function; to provide insurance coverage. If the ratio hits 100% it means they are operating at a loss, bad news for an insurance company. In order to protect themselves, investing in bonds (and other safe investments)  provide steady returns- helping their bottom line.Low interest rates do stimulate economic growth, but not for everyone. Investors and organizations counting on the returns provided by government bonds, such as pension funds, aren’t enjoying bottom rates and are counting on the recovery of our economy to breath again.US MarketsThe big talks in the US Markets are still related to everyone’s favorite topic: The Euro crisis! However, this week’s spotlight is from - wait for it – not Greece! Italy’s Prime Minister Berlusconi announced that he was planning on resigning, causing a rally in markets… Read More

Market close, 24-28 October 2011

Canadian marketsThe week of 24-28 October was overall a very good one, with the TSX up 4.77% since Monday. This bullish surge is particularly due to news that European leaders struck a deal for private sector holders of Greek government bonds to accept a 50% cut on Wednesday. Also supporting the rally of the Canadian market, the global gold index was up by one percentage point despite bullion trading at the same price.Some notable stocks in the TSX are metals miner Inmet Mining Corp (IMN.TO), up 9% on good earnings announcements, and MOSAID Technologies (MSD.TO) on the announcement of a private-equity acquisition of all common shares at $46/share.Important to note is that Ottawa warned unemployment will continue to be an rising issue through the end of 2011, however, the markets seemed to put more weight on the ‘good’ news (the EU bailout).US marketsSouth of the border, things have been bullish as well, primarily due to the news on the European debt crisis. The blue-chip index (DJIA) was ahead 3.6% for the week and up 11% for the month so far. The S&P 500 rose by a healthy 3.8% for the week, and many analysts are considering the S&P 500 to be undervalued as a whole, suggesting its fair value to be closer to the 1300 mark.The NASDAQ is up 3.8% for the week, despite its slight drop on Friday that most other indices did not share.Overall strong reports for the US GDP and good news on the Euro debt situation have given US markets a healthy bump.Market outlookA lot of key economic data for the US, such as tourism, payroll and manufacturing numbers, are coming up, as well as overall market expectations. Don’t forget that we are still in earnings season and the barrage of news coming down the pipe… Read More

Market close, 17-21 October 2011

Canadian marketsThe S&P/TSX is down 1.21% on news of rising core inflation (now at 2.2%, highest since Dec 2008) and overall annual inflation levels (3.2%, up from 3.1% in August).Governor Mark Carney is still expressing concerns about the European debt crisis and the possibility of another global recession; he called this more worrisome than the inflation reports. His decision to keep interest rates at a lowly 1% has traders pricing in rate cuts rather than hikes for the near future. On Friday Canadian (and most global stocks) rallied on optimistic outlooks for the European debt crisis.US marketsThe American markets had a generally good week with the S&P 500 up 1.12%, and the Dow Jones up 1.41%. Only the NASDAQ was down 1.14% mainly due to tech giant Apple (NASDAQ:AAPL) missing its earnings estimates for the first time in six years, causing the stock to tumble 6.9% over the week. Apple stock holders should take into consideration that these earnings did not take iPhone 4S sales into account, which amount to 4 million units on launch weekend. Analysts seem to not be bothered by the missed earnings either, keeping a consensus 1-year price target of $500. Most stocks were up on solid corporate earnings and slightly more optimistic outlooks on the euro debt situation.SummaryThe week ending 10/21 started off weak, but by Friday some strong earnings reports reassured investors and steered away concerns of another global recession.The European debt crisis, however, is still keeping investors nervous and will continue to do so until a solid conclusion is reached. Earnings season is always a volatile time, and investors would be wise to follow closely their holdings as we all try and navigate through murky financial times. Read More

Market close Nov. 4th

Canadian marketsThe first trading week of November started with MF global (NYSE:MF) filing for chapter 11-bankruptcy protection on Monday after the closing bell, causing world markets to tank, including the S&P/TSX index to slump 2.5% on Tuesday. Despite the rough start the Canadian index slowly rose back to the 12,400’s on good earnings releases and bullish momentum. Unfortunately, Canadian markets were shocked with a disappointing job report on Friday in which the government of Canada reported that most jobs gained in September were lost in October. This caused a slight slump in our index, which ended this week’s roller coaster with a 0.89% loss and renewed fear of an uncertain economic future.US MarketsOur southern neighbors suffered the most from the MF Global incident with financials losing 5.92% over the week as measured per the Dow Jones Global Financials Index. Notable losers include Goldman Sachs (NYSE:GS), falling 9.34% over the week, and Bank of America (NYSE:BAC) down 11.7%. Italian sovereign debt saw an unexpected yield rise on Tuesday, causing concern for investors that are likely to see Italy next on the death list.  Speaking of death list; Greece Prime Minister George Papandreou announced Thursday that he would hold a referendum on the bailout plan, a move which surprised investors and raised more concerns about the Greece debt crisis. DJIA is down 2.03% for the week, while the NASDAQ fell 1.86%. On the bright side, the US government announced that the unemployment rate fell to 9% as they estimated 80,000 jobs were created in the month of October.Market OutlookOctober was a very good month for the financial markets despite the European debt unrest; most indexes were up 10-12%. Over the coming weeks it will be interesting to see how Papandreou handles this crisis, and what will happen to Greece. Investor confidence is… Read More