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Market Update 
6 October 2015
 
As we edge closer to the federal election, the financial impact of our future economic success weighs heavily on our minds. Our Loonie took a tumble along with the American dollar, and both nations saw current 10 year bond yields drop. The root cause of the American dollar tumble, in addition to the 10 year bond yields falling, is the Labour department release of their jobs data report for September. The report fell well below the 200,000 new jobs economists had expected, coming in at 142,000.

The unemployment rate still remains at 5.1% in health territory. Global concerns with China and emerging economies are having an effect on North America and Europe making job growth limited. Retail sales and food remain strong for the month of August, with a 0.2% growth for the month and up 2.2% from August 2014. The magnificent draw on resources and industrial goods from emerging economies and China over the last 30 years has ended leaving a void in this specific job sector. In America, even though the over all job numbers did not meet expectation, job growth in key sectors was realised. Health Care did see jobs increase by 34,000 in September and Information Technology added 12,000 jobs. Professional services grew by 31,000 positions, while Retail jobs rose by 24,000 and lastly, food services posting a 21,000 increase in new hires.

Is the American economy growing? Yes. Is it growing at the pace that the Federal Reserve would like it to be? No. This is why we feel that it will be very difficult, if not impossible, for the American Fed to raise interest rates without hurting the future GDP.   Wage inflation has remained unchanged for the month of September removing pressure about inflation from the Fed.

Oil prices sunk on both the New York exchange for light sweet crude at $44.32 and Brent crude, posting a bigger drop by 5 cents, at $47.27. Russian air strikes in Syria have brought concern about a larger outbreak of war in the region, which ultimately pushed oil prices up over the last few days. That being said, the marginal miss on the job report data for September had a bigger impact of oil prices falling than the Russian involvement in Syria.


The EU and Europe find themselves with a new challenge to absorb all the refugees fleeing Syria. This is a colossal task as Europe as a whole is not setup for this kind of migration. As it has been made clear, not all member states agree with Germany in offering a warm welcome.  If the refugees are not handled correctly, the movement of goods and people along EU boarders will become very difficult and costly.

Britain has been the shining example over the last 10 years on absorbing and integrating newcomers. Will the EU take a page out of the British immigration progress? Germany is the only nation which has made firm commitments on a long term basis.  

China, the great fire breathing dragon, has exhausted itself.  Chinese consumption and consumerism can not self sustain the required GDP growth. What’s next? Expect to see slow moving China along with emerging markets.
 

As Canadians prepare to go to the polls and cast the most important electoral vote of the century, the race for the top spots in Canada’s parliament is too close to call. Minority governments may be the new trend.
 
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Ahmet Jakupi Financial Solutions (AJFS) is a leading integrated solutions private wealth management firm.
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