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Market Review for July 2016

Goodbye BREXIT, hello record highs!

July had the potential of being a negative month as per what transpired in the UK in the previous month. Instead, it was a very good month overall for the markets and it also provided a great indicator that investor’s risk appetite has returned with technology being the most improved sector on both sides of the border.

The UK announced that it has cut rates to 0.25%, in addition to a stimulus package to help reduce the possibility of a future recession. The European Central Bank “ECB” decided to hold its rates steady and indicated that they will wait until September’s economic numbers before deciding on any action. Japan provided a plan for additional stimulus, but it did not meet the size that investors have hoped for. Lastly, the US Federal Reserve made not changes but did reinforce that a 2016 rate hike is still on the table. A strong jobs report would help its claim to raise rates.
Gold and silver continue to rally and both made new 52 week highs, unlike oil prices recently, as they moved lower due to supply concerns. A good support level is $40 and that number will serve the greatest impact if it holds.
2016 is slowly becoming a better year, as compared to what we saw at the start of the year. Some analyst are predicting oil to be at $70 by the end of 2016, which we find is very ambitious, but if we get even close to that number, the markets will undoubtedly have a pretty good year.

The most notable developments this month have been the following.

Canada
– Recent well performing sectors are Basic Materials, Energy, Utilities and Telecommunications.
– Precious metal are still hot as the price of Gold and Silver continued to make new 52-week highs this past month.- Crude Oil prices have declined and are just above the $40 mark, (a major support level).
– The Canadian dollar weakened against the US dollar in July, but only slightly ($0.764 versus $0.775) from the month before.
– The province of British Colombia has suggested imposing a tax of 15% on foreigners buying property that is not for primary residential purposes in order to slow down the massive surge in prices in Vancouver and the surrounding areas.
– Canada’s employment fell 31,200 in July, nudging its jobless rate to 6.9%.
– A major concern for Canada’s economy is growing trade deficit as export volumes fell in the 2nd quarter.
United States
– Recent well performing sectors are Utilities, Real Estate, Telecommunications and Basic Materials.
– It has finally been made official as Hillary Clinton formally accepted the Democratic Party’s presidential nomination. A week earlier, Trump was named the leader to the Republican Party.
– The most recent estimate for the second-quarter GDP showed only a modest 1.2% annual rate of growth.
– Auto sales had stagnated for much of the year, but were up a whopping 7% in the month.-Consumer spending has positive momentum heading in to the 3rd quarter as it jumped 4.2% with Amazon posting strong numbers from their Prime Sales Day and the above mentioned auto sales.
– Nonfarm payrolls continue to add jobs, with 255,000 added for the month of July. Most of the growth came in leisure and hospitality and healthcare.
– The continued positive jobs report numbers have increased the probability of a rate hike after Brexit almost ended the possibilities for 2016.
– Numbers came out for June showing the median sales price for new homes jumped from $288,800 in May to $306,700 in June, while the average sales price was $358,200 up 3.7% from the prior month.

Global

– Japan’s Prime Minister Shinzo Abe was re-elected in a large victory and vowed a new stimulus package to try once again to jump start their economy. Last week Prime Minister Abe announced a 28 Trillion Yen stimulus package to stimulate their struggling economy, which was less than expected.
– Pokemon GO grabbed headlines doubling Nintendo’s share price for ¥15,000 to ¥30,000 in a couple weeks, two weeks later the fad cooled and Nintendo retreated back to ¥20,000.
– China PMI rose to 50.6 from 48.6 in June, the first growth month since February 2016 and highest since January 2015.
– Bank of England cut rates by 25bps to a record low 0.25% and purchased corporate bonds and introduced a new bank lending program in the wake of Brexit.
– The Pound and Euro get hit hard as European and British markets put Brexit in their rear view mirror.
– The German DAX index was up 6.7% in July, after being -5.6% in the month of June.
– The UK’s FTSE index was up 3.38% in July, this followed a positive moth in June where it was up 4.3%.

Eye on the Month Ahead

– Will there be continued volatility as volume is expected to be light?
– We are seeing some impact with the Brexit vote, but will UK’s stock market continue to rally?
– Has oil have enough strength to stay above $40 and move upwards?
– Can the US maintain it safe haven status among investors for the remainder of the year?
– Will the upward price momentum in the markets will continue over the summer months?
We continue to believe having a globally balanced portfolio with a focus on low volatility will help lower overall investment risk while having the ability to capitalize on investment opportunities.

Economic Calendar

Please do not hesitate to contact us if you have any questions or would like our team to review your investment strategy.

Best Regards,

Konrad, Justin and Merriel
Echelon Wealth Partners – LK Wealth Management Group
Sources: Market Q, Bloomberg, Reuters, Globe and Mail, Wall Street Journal, Huffington Post, Forbes, Goldman Sachs
Disclaimer: Echelon Wealth Partners Inc. is a member of IIROC and CIPF. This document has been prepared as a monthly market update and does not contain any recommendations for any particular investment. It is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular investing strategy. Any investment decision should be based on your own risk tolerance and investment objectives and reviewed with an investment advisor. Any opinions or recommendations expressed herein do not necessarily reflect those of Echelon Wealth Partners Inc. The data used in this document is from various sources and is believed but in no way warranted to be reliable, accurate, complete and appropriate.