Week of January 5, 2015

MARKET STATISTICS: Weekly Change

ECONOMIC STATISTICS:

WEEKLY ECONOMIC REPORT

JANUARY 5, 2015

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org

U.S. STOCK MARKETS - THE YEAR IN REVIEW The accelerating United States economy overshadowed problems overseas to lift the stock market to new highs in 2014. The Standard & Poor’s 500-stock index closed on December 31, 2014 with a gain of 11.81% for 2014, marking the third consecutive year that the market benchmark has risen by more than 10 percent.

The Dow Jones industrial average closed up 8.16% for 2014 while the NASDAQ composite closed up 13.94%. The stock markets certainly hit high in 2014 as the bull run continued.

S&P 500

DJI

NASDAQ

Still, there were reasons to doubt the stock market’s roaring display. For example, the bond market has not signaled the same optimism as the stock market; the yield on the 10-year treasury note fell to 2.17 percent as opposed to 3.03 percent at the end of 2013, which typically does not happen as economic strength causes government bonds to decline in price and push up their yield. Regardless, the year has passed and each of the markets have risen to new highs.

WEEKLY ECONOMIC REPORT

JANUARY 5, 2015

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org

S&P/TSX COMPOSITE INDEX – REVIEW OF 2014 2014 marked the third annual gain for Canadian stocks. With global commodity rout hammering energy stocks, the traditional engine of the Canadian market, the gain for the S&P/TSX Composite Index piggybacked the fewest number of companies since 2008. The index climbed 7.69% for the year.

The S&P/TSX Energy Index slumped this year, the worst performer among 10 industries in the broader benchmark and also the biggest decline since 2011. Meanwhile, mergers and acquisitions played a big role in stocking the top Canadian stocks in 2014 – Canadian firms were involved in $229 billion worst of transactions through December 29, the highest annual tally since 2007 and a 45 percent increase from a year ago. The TSX advance for 2014 is about half of what it had racked up by mid summer; it still ended with a respectable gain for the year, even as oil prices resumed their decline.

2015 FORECASTS As usual, many analysts are on both sides of the fence – some screaming a warning of 2015 and others believing in another year of growth. Some individuals, such as David Rosenberg, chief economist and strategist at Gluskin Sheff & Associates Inc. in Toronto, forecast “high single-digit growth” for next year.

As well, many Wall Street analysts contend that the market is reasonably valued right now and expect good growth for the coming year. On the other side of the fence are people such as Warren Buffet, who are flashing warning signs of a potential plummet: Buffet points out that the total value of the American stock market is over 40 percent higher than the G.D.P.; the last time that ratio was higher was at the year end in 1999 before the crash in 2000. Along with Buffet, multiple major investing companies have cited an impending crash in the coming year. As for myself, I believe that a stock market crash is on the horizon.

However, regardless of all this brainpower, only one thing remains certain for 2015: only time will tell.

THE WEEK AHEAD Canadian Merchandise Trade Balance - November - Wednesday, January 7, 2014 at 8:30am

United States Wholesale Trade – November - Friday, January 9, 2014 at 10:00am

Canadian Employment Report – December - Friday, January 9, 2014 at 8:30am

United States Employment Report – Dec. - Friday, January 9, 2014 at 8:30am

UPCOMING CSIT MEETINGS Monday, January 5, 2015 at 1:30pm - Sector Meetings WEEKLY ECONOMIC REPORT

Thursday, January 8, 2015 at 3:30pm - Team-Wide Meeting JANUARY 5, 2015

Ronald Chow, Chief Economist ! ronaldchow@crescentschool.org