Market Watch- Nov. 2, 2018

By Scotia Wealth Management - The Zukiwsky Group (Sponsored)
November 2, 2018 - 3:27pm

Global Stocks Stage Rally After Rough October

Global equities began November with a broad rally on Thursday after a miserable October, boosted by upbeat earnings reports and signs of hope that cooler heads might prevail in the trade war between the U.S. and China. In Europe, the Stoxx 600 climbed 0.2%, setting it up for a fourth straight day of gains. Stocks in Asia, meanwhile, were mostly higher. Hong Kong’s Hang Seng Index added nearly 2% to secure a second-straight day of gains and help pare its losses for the year to 15%. For the MSCI All-Country World Index, which tracks equity markets in 47 countries, October was the worst month since May 2012. The index shed over 7%, as investors became increasingly worried about tariffs, slowing global growth and higher U.S. interest rates. By Wednesday afternoon, stocks around the world had lost more than $5 trillion in value in October, according to S&P Dow Jones Indices. Adding to the market’s woes has been a rare simultaneous drop in bond prices that has sent yields near their highest levels in years. In news at home, Canada’s economy grew for a seventh straight month in August, its longest expansion for more than a year. Statistics Canada said on Wednesday that August GDP edged up 0.1%. On Tuesday, the Bank of Canada confirmed that more interest rate hikes would be needed to achieve its inflation target and said now was the ideal time to remove monetary stimulus given the economy’s strength. Analysts said the BoC will be closely monitoring wage growth in the country. Meanwhile, oil fell on Thursday, hitting its lowest levels since June, due to rising concerns over weaker global demand and increased supply from the world’s major producers. Finally, China guided the yuan on Tuesday to its weakest official level in a decade. China’s currency has been hit this year by an economic slowdown, which has been exacerbated by U.S. tariffs on hundreds of billions of dollars of Chinese goods.


Markets Bounce Back After Rough Monday

For the four days covered in this report, the Dow climbed 693 points to close at 25,381, the S&P 500 added 81 points to settle at 2,740, while the tech-heavy Nasdaq gained 267 points to close at 7,434. In Canada, the TSX was up 262 points to end at 15,150.


Fixed Income

Do not avoid fixed income. Notwithstanding our expectation that central banks will gradually raise policy interest rates, which are highly correlated with short-term interest rates, we remain confident that long-term interest rates will remain constrained by demographic trends and excess indebtedness. Importantly, fixed income securities can offer investors very predictable cash flows to help immunize a portfolio against rising equity market volatility. Both credit and interest rate risk need to be managed tactically. Of note, many investors have recently piled into low-quality (non-investment grade) bonds that are much more likely to default or decrease in value as the business cycle matures, an action we would caution against.


(Big Picture - by Bill Curry) 


This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc. (SCI). This publication is intended as a general source of information and should not be considered as personal investment or tax advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. Opinions, estimates, and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither SCI nor its affiliates accepts liability whatsoever for any loss arising from any use of this publication or its contents. This publication is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. SCI, its affiliates and/or their respective officers, directors, or employees may from time to time acquire, hold, or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. SCI and/or its affiliates may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may receive remuneration for same. All insurance products are sold through Scotia Wealth Insurance Services Inc., the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank Group. When discussing life insurance products, ScotiaMcLeod advisors are acting as Insurance Advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc. This publication and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI. 

Attracting investment through the Edge Investment Forum

Join the Discussion

We are happy to provide a forum for commenting and discussion. Please respect and abide by the house rules: Keep it clean, keep it civil, keep it truthful, stay on topic, be responsible, share your knowledge, and please suggest removal of comments that violate these standards. See full commenting rules.