Rise In Terrorist Activity Adds To An Already Uncertain Outlook For Capital Markets; We Remain Cautious In The Near‐Term

Here’s What We’re Thinking

November 17, 2015

Equity markets are once again in a familiar situation of trying to navigate through opaque conditions. With the recent spate of terrorism added to the list of risks and uncertainties we continue to view the risk/reward proposition as neutral and suggest investors continue to maintain a defensive posture that includes holding above‐average levels of cash and focusing on dividend payers. A potential Fed rate hike in mid‐December would be positive for the Financial sector (banks, lifecos) and could result in modest weakness for the traditionally rate sensitive Telecom, Utilities, and REIT sectors. Amongst this latter group, we think Canadian REITs are the least vulnerable as the sector’s valuation has declined over the past 18 months due to economic concerns whereas Telecom and Utilities trade near multi‐year highs. Due to  global oversupply conditions likely persisting well into 2016 we don’t expect the Energy and Materials sector to mount a sustainable recovery in the near‐term…

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