December 3rd, 2013 Business & Market Update

Some strength overnight in China as the service sector continues to produce strong numbers in November.  Markets in China were up 0.69%.  Japan also rallied on an additional $53bn of stimulus that will be put into the economy in the first quarter of 2014 to offset some tax increases.  Markets there were up about a half a point.

In Europe, factory orders continue to be weak as November numbers came in at a 4 year low, however the UK construction sector continued to expand in November showing that economy continues to decouple form the rest of Europe.  Markets in the region are off about 1.50%.

Us and Canadian futures are both off this morning by about a quarter point on profit taking and continued concern the tapering will occur sooner than thought.  Our US strategist Tony Dwyer again this morning confirmed his conviction on the equities market while indicating a correction could occur.  His summary:

Summary. Our fundamental thesis — (1) historically low inflation, (2) ultra-easy Fed, (3) positive trajectory in the economy and EPS, and (4) valuation expansion — remains firmly in place. Until we get consistently stronger economic numbers OR core inflation expectations begin to rise aggressively, we expect the Fed to stay on course and keep short rates pinned through 2014. Even with the prospect of a correction in the market, we continue to urge investors to not fight the Fed or the tape, and with the uptrend in place, the economy in the fundamental sweet spot and the SPX trading at 16x our conservative 2014 estimate of $115, our conviction level for SPX 1,955 in 2014 remains high. Our favored sectors looking out into 2014 remain the Financials, Industrials, Health Care and Information Technology.

Chrysler reported November auto sales increased at 16% vs. 11% estimated.  Also, BMO released their earnings which beat on both top and bottom lines, however about $0.19 per share came from securities gains which has traders selling off the stock in the premarket.  The company also raised the dividend by 5.5% and authorized a $15bn share buyback.

 

 

Kenneth A. Dick, BA, CIM, CFP, FCSI

Branch Manager & Portfolio Manager | Independent Wealth Management

Canaccord Genuity Wealth Management

www.glwm.ca

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