The Good, The Bad and The Ugly!

(With apologies to Mr. Eastwood et al)

The Good: Stock markets (especially in Europe) are higher. 

Basically it is a "relief rally"...some good news for the economy  from the headline news :

• Data on Chinese trade showed a jump in exports, giving investors hope that the situation in China may be improving.
• Oil prices have resumed their upward trend with the hope that OPEC and Russia will announce a production cap and the International Energy Agency outlook suggests a reduction in the current over-supply through the end of 2016:

• JP Morgan earnings results were better than expected.
• The Bank Of Canada left interest rates unchanged as they were pleased with the fiscal stimulus offered up in the budget.

The Bad: (behind the scenes)

• International Sales in China continue to fall.
• JP Morgan still posted declines in earnings, Bank Of America missed estimates (and posted declining earnings) and Wells Fargo (the 3rd biggest bank) also reported a slide in Q1 earnings and set aside more money to cover losses from lending to energy companies.
• Bank Of America, JP Morgan and Wells Fargo were among the US banks that learned Wednesday that they had failed a key regulatory requirement aimed at avoiding another financial crisis.
• The Bank Of Canada lowered forecasts for growth, expecting business investment to grow at only .5% vs. the .8% projected in January and also cut forecasts for consumer spending and exports.
• Volume on the S&P 500 remains considerably lower than volume in January and the beginning of February.

The Ugly:

• Retail Sales in the US declined unexpectedly in March.
• As the Consumer (2/3 of the US economy, as if I have not said this enough over the past year and my sincere apologies for the repetition) is not showing up so far this year.
• The outlook for US Q1 GDP has now been revised to within a "rounding error" of 0% growth.

Well my friends, we are certainly happy to see stock prices higher, especially in Canada because we re-balanced at the beginning of the year to add more Canadian equity assets and reduce exposure to US equity assets. 

Year to date, total return on the S&P 500 (including dividends and currency adjustments) is about -4.5%. For the TSX, the total return is about + 6.75%. That works nicely in our favour by about 11.25%. 

Time to take profit and quarterly re-balance back to even-weight? 

Probably. 

And perhaps raise a little more US cash as the S&P 500 is only about 3% from its all time highs and the Bank Of Canada clearly does not want a stronger C$.

Active, discretionary portfolio management can accomplish this in a "heartbeat". Perhaps, if you don't have active, discretionary portfolio management you might wish to call your advisor and have a conversation. If the conversation is not to your liking (or there is an effort to convince you otherwise), I am more than happy to chat.

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