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Views from the Hill  
An off-the-cuff forum to comment on the trends
and happenings we see affecting markets.

Views from the Hill

Jul

29

2015

Global Markets & Fed Update

Posted by John Kim


Last week could be characterized as the hangover from the relief party of the Greek debt deal and Chinese stock market stabilizing.  The TSX started the week on a down note, continuing the downtrend from Friday, and steadily declined the rest of the week.  Commodities, especially oil, continued to be sold as worries over global growth and strength of the US$ weighed on the sector.

The weak commodities really pressured the resource sectors on the TSX, as the energy and materials sectors were down 6.1% and 8% respectively.  Only sectors up last week on the TSX were healthcare, (due mostly to Valeant), and consumer staples (on the back of strong earnings out of Loblaw).  Financials were still under pressure from U.S. hedge funds shorting banks and housing related financials, especially Home Capital and Genworth.

After the euphoria of a Greek debt deal and stabilizing Shanghai stock market, investor focus turned to earnings and the economy.  Most earnings in the U.S. were uninspiring and a few, notably Apple, Microsoft, Yahoo, 3M, American Express, missed expectations.  This led to worries about a global slowdown, as Chinese and European economic data came in below forecasts.  This all led to markets selling off around the world as the week wore on.

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Jul

24

2015

Ben Cheng's thoughts on the markets

Posted by Aston Hill Sales & Marketing Team


Ben Cheng will be co-hosting BNN's "The Street" next Thursday, July 30 from 7am - 9am EST. Tune in to hear his thoughts on the market, where he's finding value, and an update on Aston Hill. In the meantime, here's a short summary of Ben's current outlook...


Outlook for the summer:
Global economic growth should be a concern for all investors today.  China’s GDP is certainly not growing at its target rate of 7% and we could see further evidence of slowing growth as the year progresses.  Europe seems to have passed the “Grexit” crisis for now, but the stress of the last few months has certainly taken its toll on the European economy.  We may expect that QE from the ECB could be extended beyond its current timeframe.  Fortunately, the US economy continues to recover and we should expect job growth and consumer demand to be healthy over the next twelve months.   I would expect that the strong US dollar will eventually translate into slower export growth from the US.  With all this in mid, the Fed will certainly raise rates once this fall, but then we should expect the Fed to put things on hold until it can be sure that the strong dollar is not affecting overall growth in their economy.  Equity markets will be uncertain going into the Fed decision this fall, however if we see that the Fed is essentially “on hold” for the next six months, this may give equities enough reason to rally in 2016.  The Canadian dollar is still vulnerable here and we would look to see the C dollar potentially hit 72 cents versus the US dollar.  Crude prices will likely stay low this year and may retest the $40 USD per barrel level.

The hunt for yield versus value:
Value is difficult to find in North America right now and we are suggesting that our clients remain defensive.  The S&P 500 is still trading at more than 18 times earnings and high beta sectors like technology and health care/sciences may be vulnerable if they miss optimistic earnings estimates.  That being said, you may still want to be long the US dollar as it is the strongest economy on the planet today.  We continue to like real estate (REITs), with the exception of retail focused (malls) real estate.  We also think there is decent value in high yield bonds and would look to add to positions if yields in the sector back up.

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Jul

17

2015

Preferred shares were crushed, is it time to buy?

Posted by Ben Cheng


The popularity of “fixed floater” and “rate reset” preferred share structures in Canada has come back to haunt the market in 2015.  With the Bank of Canada (BoC) dropping overnight rates twice in 2015, this has caused the pref market to drop by more than 10% year-to-date.   It is understandable that fixed floaters and rate resets that have a reset date approaching within the next six months are potentially at risk of being “reset” at the bottom of the interest rate cycle.  However, looking beyond the next six months there is a very real possibility that the BoC will reverse the 50 basis point easing that they have enacted so far.

Obviously, the western Canadian economy has been reeling from the drop in energy prices.  Market participants now fear that the slowdown will spread eastward and potentially cause the entire country to enter a recession.  We believe that this fear has gone too far.  Longer term interest rates remain very accommodative and the drop in our Dollar relative to the U.S. dollar will be very stimulative to the manufacturing and export driven industries in eastern Canada.  Thus, we believe the BoC will be looking to tighten rates in 2016.

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Jul

9

2015

Reduced Currency Hedge in Aston Hill Capital Growth and Opportunities Funds

Posted by John Kim

The USD hedge in both the Aston Hill Capital Growth Fund and the Aston Hill Opportunities Fund will be reduced to 25%. 

We believe this is a necessary move ahead of the growing consensus that the Bank of Canada (BoC) will cut interest rates next Wednesday especially following weak trade numbers released earlier this week. Canadian job numbers will be out tomorrow but even a positive number may not be able to prevent the rate cut.  We believe that if a cut does happen, the quick market reaction will be to sell the CAD$. However, if the BoC does not cut rates, we don't think the CAD$ will rally - so, from a risk/reward perspective, this decision should be a good one going into next week.

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Jul

6

2015

Global Market Update

Posted by John Kim

Last week was all driven by macro events in Greece and, to a lesser extent, China.  The Greek government surprised everyone by stopping debt negotiations and call referendum on the creditors’ offer.  Prime Minister Tsipras said he wanted the people of Greece to decide.  He asked the people to reject the offer to give him a better position from which to bargain.  Not really sure why he thinks he will have more bargaining power if the people reject the offer.  Tsipras said the vote was only about the creditor offer, but members of the EU said it was a vote on staying in the Euro.

Not to let Greece hog all the headlines, China’s Central Bank (the PBOC) cut the lending rate by 25bps to 4.85% and the RRR by 50bps for banks with loans to Agriculture and Small Business.  All this to try and stem the bleeding in the stock markets.

With these surprises, world markets sold off last Monday due to all the uncertainty created by the call for a referendum.  Markets hate uncertainty and with every headline out of Greece, markets reacted.  But the U.S. and Canadian markets recovered somewhat after U.S. economic data showed decent job growth – although not great – keeping alive the hope of some for only one rate hike in 2015 in the U.S.

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Disclaimer:
This commentary is published by Aston Hill Financial Inc. (“Aston Hill”). The information contained herein does not constitute a recommendation by the authors or Aston Hill to buy or sell any of the securities, commodities, currencies or other financial instruments or assets discussed herein. This commentary has been prepared using information from sources that the authors and Aston Hill believe to be reliable, however neither the authors nor Aston Hill guarantees the accuracy of such information. This report does not constitute and may not be used for the purposes of effecting an offer or solicitation of units of any Aston Hill investment products. Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus and other publicly filed documents available at www.sedar.com before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

Please correct the following errors:

Minimum Investment Requirements

The AHF Credit Opportunities Fund is generally available to investors that can meet a certain minimum amount of money to invest. The minimum initial investment for residents in any province or territory in accordance with applicable securities laws is set out below:

All provinces and territories $125,000 or $25,000(1)
BC, NB, NS and NL Only: $5,000(2)

Notes:

(1) A minimum purchase of $25,000 is available to residents who meet certain requirements.
(2) A minimum purchase of $5,000 is available to residents who meet certain requirements and reside in BC, NB, NS and NL by way of the prescribed OM.
Investors should contact their investment dealer or Financial Advisor for more information.

If you can comfortably invest the minimum dollar amount required in your province or territory, please accept the disclaimer below to learn more about the AHF Credit Opportunities Fund.


Disclaimer: Information pertaining to AHF Credit Opportunities Fund is not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units in the AHF Credit Opportunities Fund is made pursuant to its offering memorandum only to those investors in jurisdictions of Canada who meet certain eligibility requirements. Please read the offering memorandum carefully before investing.

Minimum Investment Requirements

The Aston Hill Opportunities Fund is generally available to investors that can meet a certain minimum amount of money to invest. The minimum initial investment for residents in any province or territory in accordance with applicable securities laws is set out below:

All provinces and territories $150,000 or $5,000(1)

Notes:

(1) A minimum purchase of $5,000 is available to residents who meet certain requirements. Investors should contact their investment dealer or Financial Advisor for more information.

If you can comfortably invest the minimum dollar amount required in your province or territory, please accept the disclaimer below to learn more about the Aston Hill Opportunities Fund.


Disclaimer: Information pertaining to Aston Hill Opportunities Fund is not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units in the Aston Hill Opportunities Fund is made pursuant to its offering memorandum only to those investors in jurisdictions of Canada who meet certain eligibility requirements. Please read the offering memorandum carefully before investing.

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Markets

Aug 2, 2015 16:04 EDT

AHF-T -0.06 icon-arrow-down-red-small.png 0.42
S&P/TSX 85.97 icon-arrow-up-green-small-dark.png 14,468.73
S&P 500 -4.79 icon-arrow-down-red-small.png 2,103.84
Dow Jones -56.12 icon-arrow-down-red-small.png 17,689.86
NASDAQ -0.50 icon-arrow-down-red-small.png 5,128.28
CAD/USD -0.00 icon-arrow-down-red-small.png 0.76
Oil (NY) -1.75 icon-arrow-down-red-small.png 46.77
Gold 6.30 icon-arrow-up-green-small-dark.png 1,095.00
Natural Gas -0.05 icon-arrow-down-red-small.png 2.71
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