Spring brings with it a new financial reality

Spring is definitely in the air; birds are singing, those frustrating white grubs again become an obsession, and golfers are getting set for a new season. What else . . . Oh, yeah! The equity markets just rallied 30 per cent off their lows. Suddenly, we’re all feeling a little bit better about our financial health. However, though we can have confidence that after winter comes spring, we can’t shake this nagging concern that our investments may not continue to perform in the same consistent fashion we had become accustomed to prior to the recent implosion.

Perhaps it’s simply due to the timing of my first article for The Chronicle (with whom I am very excited to be starting a relationship), but I believe the change-of-season analogy to be quite appropriate. I’m very optimistic that investors can fare well in the years to come and achieve their long-term financial goals. I do believe however that, like the seasons, the investing climate will take on various forms and investors will have to adapt to new realities.

It is this new reality, as I term it, that prompted me to want to share my views and opinions on financial matters, and specifically, on the markets. In my role as Associate Portfolio Manager at ScotiaMcLeod, I take pride in managing my clients’ portfolios and contributing towards their financial well-being. Via this weekly column, I hope to be able to offer you a lending hand in the investment decisions you make by sharing with you my observations and ideas. Moreover, I look forward to responding to questions you may have that may also benefit other readers. Together, we’ll attempt to make sense of what is transpiring and navigate what are sure to be interesting times in the months and years ahead.

The format I will pursue will be comprised of two parts. The first portion will be wide open and deal with any and all financial topics. In fact, you the reader will decide what it is I should address. I will respond to your questions so feel free to ask me anything related to the world of finance. For instance, you may have questions surrounding the bear market, fixed income ideas/strategies, or something a little more complex such as Central Bank quantitative easing initiatives and what implications that may have on the markets.

To submit your questions, simply e-mail them to me, or The Chronicle News Director Marc Lalonde (marc.lalonde@transcontinental.ca) and I’ll answer them to the best of my abilities.

The second portion will consist of a weekly observation of my choosing. For the most part, I will bring your attention to new developments in the markets that may directly impact upon your investments. You can expect a graph or two to highlight what it is I wish to draw your attention to. The goal behind this will be to promote an understanding of where various segments of the markets are at any given point in time.

Chart of the week

To kick things off, we’ll tackle the question as to whether now is a good time to buy equities. In order to do so, we will defer to the Standard &Poors/TSX index (TSX). The TSX is a composite of the largest public companies in Canada and acts as a leading indicator towards gauging the health of Canada’s economy. Simply put, the direction in price of Canada’s leading companies (the TSX) provides clues as to how investors feel about the economy.

We know from history that markets typically move up somewhere around six months prior to an expected economic recovery. And so it’s comforting to know that the TSX is up a very impressive 30 per cent since the lows were made in early March. This sudden rise explains why it is that investor sentiment had made a 180-degree shift in such a short time frame. In fact, investors who may have panic-sold may now be concerned about missing the next major bull market. And while there may well be further upside, investors looking to add new funds at the current time may wish to pay particular attention to how far we’ve come back in just under two months.

From the chart below, we can see that we are quickly moving towards the highs made in November 2008, when the TSX first attempted to recover from the disastrous months of September and October. It was at approximately the 10,200 level of the TSX that sellers came in and pushed the markets lower. As we approach that same level, we should be on the lookout for a possible renewed increase in selling. Investors who are concerned about missing the next bull market may want to show some patience and see whether or not the TSX can muster up enough will power to make it over what we term a resistance level. Should the TSX pull back from here, we will monitor its movement and attempt to highlight what may be a safer entry point.

Look for more Moore for your Money columns in coming weeks!

Robert T. Moore is an Associate Portfolio Manager and Wealth Advisor with ScotiaMcLeod in Pointe Claire, Quebec. Opinions expressed in this column do not necessarily reflect the views of ScotiaMcLeod or any of its affiliated companies. It is recommended that individuals consult with their own financial advisor before acting on any information contained in this article. Robert Moore can be reached at www.moorerasponi.com

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