On Monday, January 10, 2011, Scotia Capital Portfolio Strategist Vincent Delisle gave a special “Squawk Box” presentation of his outlook for 2011.

Attached is a video link that will allow you to view the full presentation.

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Video link of Scotia Capital Strategist Vincent Delisle’s 2011 Outlook presentation

About 73% of Canadians in the Scotiabank survey said the recession hadn’t affected retirement plans. The number of Canadians who don’t fully plan to retire has dropped by half to 5% in 2009 from 10% in 2008, it found.

“To achieve their retirement goals, Canadian investors need to ensure they have a balanced portfolio,” said Beverley Moir, ScotiaMcLeod senior wealth advisor. “Many investors are sitting on the sidelines in cash, bonds or GICs, however the current historic low interest rates will not provide the growth needed for many to reach their set retirement goals.”

Bev Moir spoke about the survey on Toronto radio 680 news.

A Quick Recap of our 2009 Strategy
Although global markets were falling into the abyss a year ago, we adopted a glass-half-full strategy for 2009, as we felt markets were pricing apocalyptic scenarios. With risk premia near record highs, the equity risk reward outlook was indeed very compelling a year ago. Getting confidence from our ISM model, we recommended investors add risky assets (equities, emerging markets, corporate bonds) and overweight cyclical sectors as ISM indices and employment data went from worse to bad. The worst of the global recession came in the first quarter of 2009 and economic activity has been improving since then. Our cyclical bias was maximized in June following the S&P 500 “golden cross” (50-day MA crossing the 200-day line). 2009 was a horrible year for the global economy, but equity markets managed to post solid performances, further illustrating how markets feed off anticipation, not what is written in the daily newspapers.

Read the full research report outlining portfolio strategy for 2010

The Rosedale Branch Fall 2009 Newsletter
Inside:

Market Outlook
Although the global economic news flow continues to improve, the equity market’s reaction was muted in August. Performances ranged from 4 % in the U.S. to 1.7% in Canada to –16% in China. Nonetheless, the S&P 500 is up 11.9% since the start of Q3. Scotia Capital believes the lack of momentum in August, and the potential for a pullback in September/October, have more to do with the current overbought situation and seasonality than overpriced equity markets. On that basis, our outlook over the longer term for the US markets remains positive. We expect equities and corporate bonds to outperform US treasuries over the next 12-18 months. The S&P 500’s fair value should hit 1,025 in December 2009 and 1,200 in December 1010.

Also:

• The September Effect
• Client Questions are always welcome
• Cyclical vs Defensive Stocks? Which should Investors select?
• Ideas to Help You Rebuild Your Portfolio

Investment Insights Fall 2009 (pdf)

Daily Edge Portfolio Strategy Comment by Vincent Delisle, CFA
Event
■ Executive summary of our report entitled “Why You Want to Own Canada”.

Implications
■ This report is a sequel to a theme piece entitled ” Foreign Exposure Rising: Impacts on Canadian Equity Strategy ” published in April 2007.
■ This updated edition will focus on reasons to own Canadian equities both for foreign and domestic investors. We also provide an updated list of Scotia Capital’s Top Picks.

Recommendation
■ Canada’s main attributes are as follows: (1) Emerging market exposure with lower volatility; (2) cheaper valuations relative to MSCI World; (3) stronger domestic fundamentals: (4) Canadian dollar strength relative to the USD and British pound; (5) proximity to the U.S. economy; and (6) above average market capitalization in Financials, Materials, Technology, and Industrials.

Why You Want To Own Canada
■ This report is a sequel to a theme piece entitled ” Foreign Exposure Rising: Impacts on Canadian Equity Strategy ” published in April 2007. In the first report, we looked at how the elimination of the foreign content rule would impact Canadian equities and funds flows as domestic pension funds would aim to reduce their home bias. Domestic investors have been reducing their “home bias” in the last five years, but foreign inflows into Canadian equities have more than compensated.
■ In our first edition, we also detailed the often overlooked attributes of the Canadian equity market and highlighted why foreign investors should overweight Canadian equities. This updated edition will focus exclusively on reasons to own Canadian equities both for foreign and domestic investors. We also provide an updated list of Scotia Capital’s Top Picks.
■ The Canadian economy represents 1.9% of world GDP (11th in the world with a nominal GDP of US$1.5 trillion in 2008) and its equity market capitalization weighs in at 3.7% of the MSCI World index. In terms of market capitalization, Its 10 yr CAGR of +7.8% (in USD terms) compares to -2.5% for the S&P 500, +7.6% for the MSCI EM index, and -0.7% for the MSCI-World.
■ In our opinion, the chief reason to own Canadian equities lies in its superior risk-reward profile. In the last 10 years (August 1999-August 2009), the Canadian equities’ compounded annual growth rate (CAGR) outpaced the MSCI World CAGR by 8.5% (7.8% vs. -0.7% respectively) with only 20% more volatility (Exhibit 1) Hence, Canada offers the stability of a developed economy with an exposure to growth in developing nations through its commodity sensitivity.

Read the full report: Why you want to own Canada

Dear Valued Clients,

Most of you are aware that September and October were extremely difficult months for stock markets (for the U.S. market, October 2008 was the worst month in over 20 years) – this will be reflected in the statement you’ll be receiving shortly.

A common question as I talk with clients is: “What exactly led to the current issues?”

Here’s my summarized version of how we got here:

1. Between 2001 and 2003, low interest rates encouraged global investors to begin taking on increasing amounts of borrowing and risk (generally without fully understanding the risk to which they were in fact exposed). As a result, it is now clear that debt driven demand for commodities, real estate, and stocks pushed up some prices to an unsustainable level.
2. Beginning in the middle of last year, we saw the opposite happening. As U.S. real estate prices started falling, mortgage defaults increased, and the level of debt underpinning these investments became clear, these same investors began to shed risk and sell assets, without regard to quality and often at whatever price they could get.
3. In the process of this unwinding of risk, there were massive write offs and financial institutions such as Lehman Brothers and Bear Stearns collapsed under the weight of the debt they had accumulated
4. Beginning this fall, the level of mistrust spiraled upwards and fear paralyzed markets – as financial institutions started building absolute worst case scenarios into their thinking, access to credit for consumers and businesses shrunk, and the financial system came close to seizing up.

Stock prices today are severely depressed as a result of this sequence of events. Recently I heard the current challenge for investors compared to shopping at a Boxing Day sale – with everything off 30% to 50%, our challenge is to differentiate between two categories of products:

• low quality items that are still expensive even at current prices, and
• high quality items that have been marked down and represent terrific value.

Where we find ourselves today
While there are still substantial issues to work through, the good news is that we do appear to be seeing greater stability in the global financial system – a number of financial industry leaders have commented that they are much more confident today than they were a month ago. And it’s important to remember that most conventional measures of market valuation point to the fact that the broad market is significantly undervalued.

It’s worth noting as well that despite its painful drop, Canada has actually withstood this year’s market turmoil comparatively well. Barron’s Magazine recently compared year to date performance for the 15 largest markets. Up to Friday, October 24, the Canadian market was down 33%, just ahead of Switzerland for the smallest decline, followed by the UK and the US with 40% drops. Overall, Asian markets were down 44% and European markets off 46%.

Given the drop in commodity prices and Canada’s reliance on resource stocks, this performance is better than we would have expected – and is in large part testimony to how well Canada’s banks have held up compared to those in the United States and Europe. If we see commodity prices recoup some of their recent declines, the Canadian market is quite well positioned compared to most.

Answers to common concerns
I thought it might be useful to discuss some of the concerns you might be experiencing as you watch your portfolio react to the current market conditions – and share with you my thoughts on these questions.

1. “We’re going into a deep recession”
Given the growing consensus on this subject, it appears that the world economy is indeed entering a very rough patch. But it’s important to remember that we’ve been here before. Depending on how you measure a recession, we have gone through ten of them since the Second World War, and markets came out of each one to move to higher levels. Recall that some of those recessions such as the one in the early ‘80s have been just as severe as anything currently forecasted.

2. “Today’s problems seem overwhelming and insurmountable”
We are most certainly facing daunting challenges. But once again, we’ve been here before.
As just one example, in December of 1990, the markets were down 30% in six months and the stock of Citicorp was cut in half. Canada and the U.S. were in recessions, residential and commercial real estate prices were off 25%, the U.S. was in a full blown banking crisis due to the savings and loan fiasco, and Iraq had occupied Kuwait, with no clear indication of how the West would respond.

Without in any way diminishing the magnitude of today’s issues, it’s worth remembering that we felt just as overwhelmed at points in the past and emerged just fine.

3. “With all the bad economic news still to come, this is not the time to be in stocks”
While the past is no guarantee of the future, it is the best guide we have. It is important to understand that the markets already reflect all of the bad news we know about – and that on past experience, recession-induced bear markets such as this one will see stock prices begin to rise well before the economy does.

As an aside, this was one of the key points Warren Buffett made in a recent New York Times article, explaining why he has shifted his own personal portfolio into stocks. This article is available on the New York Times website at www.newyorktimes.com.

As for the market pundits who seem to dominate the media these days, we need to look at their track record. One example is work done by CXO Advisory Group in Massachusetts. They tracked “measurable forecasts” by 50 prominent market forecasters. Their collective batting average? 48% or about the same as flipping a coin.

4. “We could go into another depression”
It is essential to recognize that today’s central bankers and political leaders learned from the terrible mistakes on fiscal, monetary and trade policy that turned what many economists believe should have been a normal recession into the most prolonged period of economic difficulty of the 20th century.
That’s why most economists believe the chances of another depression are exceedingly remote. Again, let me know if you’d be interested in recent articles from Fortune and Report on Business Magazine, explaining why this is so.

5. “I want to stick to safe investments”
At times like these when we’re overwhelmed with pessimism and downbeat news, it is understandable that some would find “safe” investments appealing. Every decision we make entails a mix of gain and pain. These days, the difficulty is the timing of when the gain and pain may occur. Stay on the sidelines and the gain in terms of peace of mind is immediate, with the pain to be felt down the road. Participate in the markets, on the other hand, and the pain of volatility and uncertainty is immediate with the gain to be had down the road.

While it may be tempting to seek the safety of secure investments, for most investors, the return on these investments will not allow them to hit their long term retirement goals. Sometimes the old advice is the best advice. At times like these, there may be value in revisiting your long term objectives, going over your cash needs and reviewing the plan you have in place to achieve your goals.

The good news is that most are properly positioned to be able to handle this downturn and wait until the market goes back up. In some cases, I am meeting with clients to review their financial plan and look at whether changes are needed to weather this storm. In a few instances, we are taking a hard look at their discretionary spending as a result.

Let me know if you would like to meet to reevaluate your goals, your current cash needs, or just to talk about your account. In particular, once you’ve had a chance to review your statement, don’t hesitate to give me a call if you have any questions or would like to talk about where you stand – you can reach me at (416) 355-6364.

Finally, please remember that I am in this with you and am here if you need me.

This article is for information purposes only. All performance data represents past performance and is not indicative of future performance. It is recommended that individuals consult with their Wealth Advisor before acting on any information contained in this article. ScotiaMcLeod does not offer tax advice, but working with our team of experts we are able to provide a suite of financial services for clients. The opinions stated are not necessarily those of Scotia Capital Inc. or The Bank of Nova Scotia. ScotiaMcLeod is a division of Scotia Capital Inc., Member CIPF.

Vincent Delisle, CFA, Portfolio Strategist, Scotia Capital

Robert Follis Director – Corporate Bond Research – Scotia Capital

Robert Follis Director – Corporate Bond Research – Scotia Capital

Robert Follis Director – Corporate Bond Research – Scotia Capital