Market Buzz

Posted by Ryan Irvine - Keystone Financial

Share on Facebook

Tweet on Twitter

Market Buzz – Positive Canadian Employment Report Largely Ignored as Market Continues Declines

The TSX Composite closed down 171 points, at 13,084 on Friday, largely on concerns related to the sustainability of the global economic recovery. The week of Friday June 10th, marked the second straight week of declines which have driven the market down 5.2% over the last 10 trading days.

At the forefront of investors’ minds is the employment picture in the U.S. and its impact on global growth. On June 3rd, the U.S. Department of Labour released their monthly employment numbers, reporting 54,000 new jobs created in April, well below economists’ forecasts of 165,000 new jobs. The new data shifts the U.S. national unemployment rate to 9.1% and was the poorest month of job creation since September 2010. The disappointing employment numbers have only added to tensions that have been mounting with respect to the government’s ability and willingness to pay-down their massive growing debt load. Further fuel was added to the fire of global uncertainty when on Friday, China reported issued foreign trade data. While China’s trade surplus did widen to US$13.1 billion, it was still weaker than expectations, with both increasing imports and lower global demand having their impact.

Also on Friday, Statistics Canada published their employment data for the month of May reporting the creation of 22,300 jobs and shifting the unemployment rate to 7.4%, its lowest level in two years. Economists are voicing mixed but moderately positive opinions on the job growth. For the most part, May employment numbers were in line with expectations, but made more positive considering the weak data coming out of the U.S. and the fact that the Canadian economy has slowed in the second quarter. There is also the issue of where the job growth is being created. The manufacturing sector lost 22,500 jobs in May which is a strong indication that the country’s economy is continuing to feel the pressure of a higher Canadian dollar and the impact it has on our ability to produce goods competitively in a global market.

Our outlook has always remained consistent. We continue to believe that there are many obstacles to address as the U.S. economy continues along the road to redemption. In no way do we expect any type of clear indication that the economy is either recovering or sliding back into recession. Although uncertainty will most likely be the theme over the next several years, we see potential opportunities to capitalize on market volatility. By sticking with strong, profitable companies and maintaining a long-term approach to investing, we are better positioned to avoid the ‘noise’ of the markets and focus on efforts on identifying fundamental value and growth.

Looniversity – Financial Statements 101 – Income Statement

The income statement tells investors about the company’s profits and losses for a specific time period. Expenses are subtracted from income to determine a firm’s profit or loss. Accordingly, this statement is also referred to as a profit or loss statement. Unlike the balance sheet, the income statement doesn’t look at the company’s financial health (total net worth). Instead, it’s looking at how much revenue a company is able to create. If you were to think of the balance sheet as an indicator of net worth, you can think of the income statement as a company’s profitability; that is, how much it can make in a given time frame.

You look at a company’s balance sheet to see exactly how much they are worth (remember, this is a book value representation rather than market capitalization) and you look at the income statement to see how profitable they are. Put simply, if a company you are evaluating has a negative net worth (their liabilities are greater than their assets) or if they have a negative income (losses), then the company might not be the best place to invest your hard earned dollars.

Put it to Us?

Q. Hey, I’m 17 and about to start college in the fall. I’m paying my way through college with scholarships, so should I invest the money I had saved? Or should I just wait until after college to start investing?

– Tim Cole; Edmonton, Alberta

A. A. An excellent question. If the money you’ve set aside for college will not be needed at all, then starting an investment plan is an excellent idea. But, if you think you might need some of it for unforeseen expenses, then you might want to keep at least half of it in a traditional bank account or short-term deposit.

But, really, now is the time to start thinking about investing, not after college. And here’s why.

A long time ago, Albert Einstein called compounding “the eighth wonder of the world” because of its amazing abilities. Essentially, compounding is the idea that you can make money on the money you’ve already earned. The best way to take advantage of this is to start early.

KeyStone’s Latest Reports Section