No Black Friday deals in the stock market

By Justin Turner CIM, DMS®, CFP®

American Thanksgiving is a traditionally slow trading week, but that hasn't stopped many of the major indices from drifting upwards and reaching new highs.  The Nasdaq hit 4,000 for the first time since the tech bubble and looks to be headed even higher.  Many experts feel the stock market is currently a bubble waiting to burst, but the fact that so many people are talking about bubbles is healthy and probably means we aren't in a bubble…yet.

**Stay tuned, next week we will double our weekly blogs to include wealth and tax planning strategies. The strategies will include straightforward topics such as RRSP and TFSA investing to more complex strategies geared toward specific investor groups.

Dow closes above 16,000 for the first time

By Justin Turner CIM, DMS®, CFP®

With the economy in better shape and based on the minutes from the most recent Federal Reserve meeting, there are rumours that the Fed could start tapering before year-end.  Although we don’t feel tapering will begin until Janet Yellen takes over in the New Year, the market does seem to be preparing for this eventuality, with rising rates, falling gold prices, and some pretty steep falls in some of the riskier sectors.  However, overall, tapering can be seen as a good thing as it supports the view that the economy is strengthening and may be able to stand on its own two feet one day without the high levels of stimulus the fed is currently providing. 

Taper or no taper, the US market has been unstoppable.  The Dow Jones closed above 16,000 for the first time ever on Thursday.  With interest rates most likely staying at historic lows for the foreseeable future, one has to wonder what, if anything can stop this market from moving significantly higher over the coming months and years.  Although the TSX has a long way to go before hitting new highs of its own, it has been quite strong and looks poised to test 14,000 in the near future, which would represent a rally of close to 20% since the lows of the summer.   It appears that for the time being the wise move would be to ride the current momentum and remain invested through at least the end of Q1 2014 when tapering as well as seasonal affects could potentially cause weaker markets.  Despite the headwinds the market could face in 2014, the long term picture looks brighter as the world economy continues on its road to recovery and the damage done to investor confidence subsides.

QE isn’t going anywhere

By Justin Turner CIM, DMS®, CFP®

Could Janet Yellen be even more dovish than her predecessor Ben Bernanke? After a week of relatively sideways markets, stocks moved up on Thursday as investors embraced signs sent by Yellen that the Fed would continue its monetary stimulus.  

Riskier assets such as gold and emerging market stocks saw especially strong moves. Yellen’s hearing before the Senate Banking Committee made it clear that she is going to continue the policies currently in place.  With markets now less concerned with the Fed’s withdrawal of stimulus in the near term; the market could see a substantial rally to close out the year, especially in the riskier or interest rate sensitive sectors.  The S&P seems poised to test the 1800 level, something most would have found virtually impossible this time last year.  

With markets at these lofty levels, we think that selling covered calls could be a good strategy to generate income while lowering downside in the event of a market correction.

Twitter IPO Recap

By Justin Turner CIM, DMS®, CFP®

Twitter (the stock) has finally arrived.  The stock opened at $45.10, a whopping 73.5% above the IPO price set less than a day before! It closed right around where it opened at $44.90.  It was a pretty incredible day one performance, but investors looking to get in on the action might want to hold off a bit as lower prices could be just around the corner.  

As far as the broader markets are concerned, the theme for quite some time has been risk-on with many markets (including Canada) hitting new multi-year highs benefiting from the delay in the US Federal Reserve’s tapering of asset purchases.  The talk has gone from government shutdowns and the debt ceiling to the Fed and the ending of quantitative easing (QE).  The current view is that tapering is unlikely to start this year due to weaker economic data.  Very accommodative monetary policy, combined with increasing global economic growth is providing a strong environment for stocks.  We see this strength potentially carrying through the end of the year and into the New Year.