Chris Kuflik - ScotiaMcLeod Montreal

This last week tested our resolve on two fronts. The first involved the Montreal Canadiens’ second seven game series victory against another team that was supposed to quickly eliminate them from the play-offs. Their play-off miracle continues. The second test involved investors’ confidence. With the rapid decline in the major markets worldwide, and subsequent partial rebound, have we been given the signal to initiate new purchases? 

The events of the past week in the US markets are not likely to soon be forgotten. Stories of the fat finger day (or whatever cause is ultimately accepted as truth), which saw the Dow Jones Industrial Average plunge over 1,000 points intraday, will be told on Wall Street for years to come. Over the weekend, the EU announced a massive 1 trillion dollar bailout package for countries experiencing debt problems. This triggered huge gains in the markets. Should this be viewed as a sigh of relief to the news or a short covering rally? Time will tell.

I was amazed at not only the size of the package but also the speed at which it was put together. What the proposed aid package has done is remove immediate liquidity concerns for EU countries and banks. It should be noted that the affected countries must comply with severe austerity measures to receive the bailout. As these measures require many changes to the social fabric of the affected nations, I expect that governments will find the measures difficult to implement.

Many of the global economic problems that I have discussed in previous articles remain. Currently my major concern with the rally this week is that it has failed to push market indicators into positive levels. Despite the large point gains of the indices the majority of equities remain on a sell signal. While there have been some upticks in these indicators, it still has not been enough to give us a buy signal. Can this change over the coming weeks? It certainly can, either to the positive or the negative. Currently we remain cautious preferring to focus on income generating investments and limiting new equity purchases. We continue to hold cash until confirmation of the market’s next move can be seen. We will continue to monitor these and other indicators closely for future investment opportunities.

Please call us at 514-287-2931 to discuss possible investments whilst mitigating potential future risks.

Chris Kuflik

Associate Director, Wealth Management

Wealth Advisor

514-287-2931

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