PORTFOLIO STRATEGY

Since the Federal Reserve cut its benchmark rate on September 18th by 50 basis points to 4.75%, incoming macroeconomic data has generally surprised on the upside and investors trimmed down expectations of further easing. However, the tide turned last week, as a light economic calendar in the U.S. focused almost exclusively on the persistent pains in the housing market. Housing is not getting any better and construction woes are impacting trucking and construction activity. Bond yields declined 22-46 basis points last week with yields on 3-month treasury bills falling below 4% again. The odds of Fed funds declining to 4.50% on October 31st currently stand at 74%, up from 32% two weeks ago.

Read the full article here: Weekly Market Strategy October 22, 2007(pdf-171kb)

Canadian Equity Strategy
WHAT DOES BEN BERNANKE SEE IN THAT CRYSTAL BALL?

At the beginning of this year we made a number of predictions on our desk. We thought that crude would outperform natural gas and it has. We thought gold would be a good investment for 2007 and it has. We thought the TSX would move higher this year and it has. Considering these predictions you’d think that we would be elated with last week’s Federal Reserve decision to cut interest rates by 50 basis points as it weakened the U.S. dollar, sent commodity prices based in U.S. dollars higher and provided a material lift to North American equity markets. But even days after the decision, the market is still grappling with the fact that we saw a cut of 50 basis points instead of 25. 50 basis points sends a very strong message that the Federal Reserve does not like what the future holds for the U.S. economy. Should we be elated with this decision? Well here are some pros and cons:

Read the full article here:Weekly Market Strategy September 21, 2007 (pdf-220 kb)