The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

• Major equity benchmarks around the globe ended the year deep in the red, although losses vary widely from region to region. On a relative basis, the U.S. was an outperformer as the Dow Jones Industrial Average generated a total return of 8.4% and 10.8% in Canadian dollar terms. The broader benchmark S&P500 Index advanced a more modest 2.1% including dividends, (4.4% in Canadian dollars). The commodity-heavy TSX Composite finished the year with a loss of 8.7%.
• Canadian bonds were a clear winner in 2011. The DEX Universe Total Return Index gained 9.7%, while the DEX Long Canada Total Return Index posted an impressive 19.8% return! Provincial and municipal bonds outperformed corporates. The long end of the curve benefited from generally weaker growth expectations, and “operation twist”, a move by the U.S. Federal Reserve to drive down long-term interest rates and reinvigorate their economy.
• With a rather volatile and challenging 2011 behind us, we look ahead to 2012 with slightly more optimistic lenses as valuations look compelling, corporate balance sheets are strong, and dividend yields are attractive in this low interest rate environment.
• There are certainly a number of risks to consider over the foreseeable future, but at the same time, we observe a reasonable number of catalysts which offset these concerns, thereby allowing us to remain cautiously optimistic.
• Among the risks in the current environment, we caution that volatility could be here to stay as concerns over sovereign debt remain an overhang. As well, in both Europe and the U.S., bringing outsized fiscal deficits under control and restoring balance sheets in the public sector is a difficult and lengthy process.
• Also carrying possibly negative implications for markets are this year’s elections in the U.S., France, and Germany, and the risk that political aspirations impede decisive action.
• Cognizant of the aforementioned risks, there are a number of supportive factors for stocks in 2012 that are worth highlighting:
  • We continue to operate in a low interest rate environment which should help to underpin stock markets as alternative asset classes become less attractive.
  • Many corporations currently boast strong balance sheets which can support business investment, M&A activity, and aggressive share buybacks.
  • Particularly over the past several months, U.S. economic data has been stabilizing and in fact suggests the economy is more resilient than originally thought, and barring another global credit crunch, should avoid a recession in 2012.
  • The debt issues facing Europe are undeniably complex. As a mild positive, however, we believe that the recent leadership changes in Europe and at the ECB are encouraging; bringing in world-class financiers as well as fresh views can hopefully help to expedite a swift and effective resolution with regards to the European debt situation.
  • We are committed to the view European politicians and regulators will ultimately put forth a credible solution to deal with these issues
  • From our perspective, fears of a hard-landing in emerging markets appear overdone. Recent economic data in China suggests economic growth has been decelerating (slower growth, not zero or negative growth), and as such, the central bank recently lowered reserve requirement ratios.
  • In our opinion, this is a signal that China will now adopt a more dovish stance and gradually prioritize economic growth over inflationary concerns. This change in policy would be positive for commodities. Longer-term, we believe that continued urbanization and general domestic growth in China and India is a secular theme that should continue to fuel commodity demand.
  • In light of the weakness throughout the second half of 2011, valuations look attractive at the moment. The S&P/TSX Composite currently trading at 11.6x forward earnings versus the long term average of 15.1x while the S&P 500 Index is also valued at 11.6x versus the long term average of 14.6x.
• Over the near term, stocks look cheap but the macro environment is still hampered by concerns over sovereign debt issues in Europe. Persistently low bond yields will continue to lead income-oriented investors into defensive, dividend-paying stocks. While valuations of utility and telecommunication stocks appear stretched by historical standards, this new paradigm – higher prices/lower yields – are a reflection of investors’ quest for yield.
• Looking ahead, the current low rate environment offers little value in the mid-to-long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.
• Austerity measures in Europe and the U.S. will ensure growth in developed economies remains slow in 2012, offset by comparatively stronger growth in emerging markets which argues for the continued need for global diversification. Over the longer term, however, valuation and fundamentals will return to the forefront.
• Equity markets are likely to remain range bound with the occasional cyclical rally within what appears to be a secular bear market for stocks. We believe there are a number of attractive investment opportunities at present but macro risks lead us to advocate a balanced portfolio, a focus on enhancing returns via dividends, and a need to be more tactical in this volatile market.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.

Summarized from commentaries by Geoff Ho and Paul Danesi – Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved.
This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents. ® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license.

ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

• Equities traded lower again last week on sustained concerns regarding Europe and German Chancellor Merkel’s continued opposition to increasing bailout funds or allowing the ECB (European Central Bank) to increase purchases of European bonds.
• Although we had no expectations in this regard, investors were also apparently disappointed when the Fed did not suggest any plans to invoke another round of Quantitative Easing (QE3).
• On the positive side, jobless claims in the U.S. were the lowest reported since May, 2008, both the U.S. and Spain held successful bond auctions, and this morning US housing starts for November came in at their highest level since April 2010 on improving homebuilder confidence.
• Weak Industrial Production numbers from India, PMI (Purchasing Managers Index) data in Europe, and more importantly China had a negative impact on the economic outlook, which when combined with U.S. dollar strength led to commodity price weakness across the board. We expect further evidence of a slowdown in China will lead authorities there to act quickly on growth oriented policy initiatives.
• Yesterday afternoon, European Union Finance ministers eventually agreed to increase loans to the IMF (International Monetary Fund) by an additional 150 billion euros; they will seek further funding from other G20 members. Importantly, these enhanced IMF resources are meant “to fill global financing gaps”, they are not exclusively for bailing out weak eurozone members.
• We continue to believe the situation in Europe will ultimately be resolved. Between the EU leadership, the ECB, and the IMF, an appropriate resolution will be achieved and they will not allow a Lehman-like collapse of the banking system; however, Germany in particular will not feel compelled to act until there is a bank requiring a bailout and Germany is then able to maximize concessions.
• As we are at somewhat of an inflection point in terms of the global economy and stock market sentiment, we expect stock market volatility to continue, resulting in equities trading in a range for the foreseeable future.
• Our investment outlook remains the same as equities are our preferred asset class as we look out toward 2012; North American bond yields are at all-time lows making higher dividend yielding equities a far more attractive investment alternative.
• For fixed income exposure, the current low rate environment offers little value in the mid to long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.
• Despite recent market declines, U.S. equities are still trading at the top end of the narrow range established since early August. We anticipate a further market pullback, but downside might be limited until the New Year due to the expected slowdown in market activity leading into the holidays.
• For trading oriented investors we recommend selective profit taking as certain stocks have demonstrated significant outperformance recently.
• Fundamentals will matter again at some point and prospects for more economically sensitive sectors, particularly for copper and energy, are brighter and not fully reflected in current valuations.
• Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
• Gold’s multi-year rally has paused of late but we recommend adding exposure on further weakness; gold bullion and gold equities should perform better in the current environment.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.

Summarized by Steve Uzielli – Director, Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved. This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents. ® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

• Equity markets were fairly quiet last week as participants awaited the outcome of the European leaders’ summit in Brussels on Friday, December 9.
• On Thursday the ECB (European Central Bank) cut rates by 25bp to 1.00% as expected; however, Mario Draghi, ECB President made comments confirming the ECB’s position that they are not going to be an aggressive buyer of Eurozone bonds, which disappointed the market.
• Although there was an agreement reached at Friday’s summit, the outcome will not be nearly as impactful as hoped. Germany continues to take an understandably hard line with its partners, reducing the likelihood further of a more substantive bailout plan.
• 26 of the 27 European Union leaders (excluding the U.K.) agreed to strict budget rules imposing a maximum deficit to GDP ratio of 3% and debt to GDP of 60%, levels to be achieved over the next 20 years; however, the penalty for non-compliance is not clear. The agreement is ultimately subject to a vote which will not be concluded until March 2012.
• As one strategist commented, the measures agreed to at the summit may help prevent the next crisis in Europe, but won’t do much to solve the current one.
• Perhaps more importantly, euro zone states and others will provide up to 200 billion euros in bilateral loans to the IMF (International Monetary Fund) who will use the funding to prop up weaker members.
• Markets were somewhat “euro-phoric” on Friday in response to the accord, but rolled over in disappointment in yesterday’s trading upon further reflection over the weekend. The agreement did not live up to the market’s expectations and the outlook remains far from certain. What is known for sure, as has been anticipated, is that austerity measures necessary for all eurozone members to comply with debt and deficit requirements will weigh on economic growth for the next several years.
• Although the euro question is not yet fully resolved, the capital markets will likely now shift focus to China and the U.S. economy.
• The policy shift two weeks ago in China to be more accommodating and less concerned with fighting inflation is positive for commodities, yet reflects a slowing, while still growing economic outlook for China.
• Meanwhile U.S. economic data over the last several weeks has been improving, and the prospect of recession is dissipating.
• As we are at somewhat of an inflection point in terms of the global economy and stock market sentiment, we expect stock market volatility to continue, resulting in equities trading in a range for the foreseeable future.
• Interestingly, a survey released this morning suggests German investor confidence rose for the first time in 10 months.
• Last week’s events do not change our investment outlook as equities remain our preferred asset class as we look out toward 2012.
• For fixed income exposure, the current low rate environment offers little value in the mid to long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.
• As U.S. equities are now trading at the top end of the narrow range established since early August, so do anticipate a market pullback, but downside might be mitigated by the anticipated holiday season slowdown in market activity.
• For trading oriented investors we recommend selective profit taking as certain stocks have demonstrated significant outperformance recently.
• Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats, and investors are “paid to wait” in the interim.
• Fundamentals will matter again at some point and prospects for more economically sensitive sectors, particularly for copper and energy, are brighter and not fully reflected in current valuations.
• Crude oil prices (WTI and Brent) remain elevated due to rising tensions in the Middle East.
• Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
• Gold’s multi-year rally has paused of late but we recommend adding exposure on further weakness; gold bullion and gold equities should perform well in the current environment.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.

Summarized by Steve Uzielli – Director, Portfolio Advisory Group
Copyright 2010 Scotia Capital Inc. All rights reserved.
This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

Here’s What We’re Thinking
The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

• Equity markets rallied last week on the promise of resolution of the Europe-saga combined with generally positive U.S. economic data which further indicates the U.S. will be able to avoid a “hard landing”, or recession.
• Recently appointed ECB president Mario Draghi made comments suggesting that if eurozone leaders reach agreement on a so-called “fiscal union” in Europe, including commitments by all members to enforced deficit and debt limits, that only then might the ECB may consider greater policy action. Many observers are hopeful the ECB will intervene in the European bond market to help stem the rise in interest rates in the region and stabilize the local economy.
• Unfortunately, capital markets are largely on hold for the balance of this week as investors await the outcome of the European leaders’ summit in Brussels on Friday, December 9 although German Chancellor Angela Merkel last week attempted to minimize expectations surrounding the meetings.
• Yesterday rating agency Standard & Poor’s placed the debt ratings of 15 eurozone members on credit watch negative while citing regional “systemic stresses” and threatened a rating downgrade in the event of failure to reach a conclusive agreement at this week’s summit.
• This week had started on a positive note as investors were encouraged by Italy’s new Prime Minister Mario Monti’s announcement of an austerity budget plan which includes substantial tax increases, spending cuts, pension restructuring, and some “growth” initiatives.
• Although we remain confident this euro-crisis will ultimately be resolved, time lines remain uncertain and we expect stock market volatility to continue, resulting in equities trading in a range for the foreseeable future.
• If there is a positive resolution achieved at this week’s summit meeting, markets would likely trade higher initially, despite the 14% rally in the U.S. market since the recent bottom on October 3, 2011.
• Ultimately however we would anticipate a market pullback, but downside might be mitigated by the anticipated holiday season slowdown in market activity.
• For trading oriented investors we recommend selective profit taking as certain stocks have demonstrated significant outperformance recently.
• Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats, and investors are “paid to wait” in the interim.
• As stated previously, fundamentals will matter again at some point, and with a slowly improving outlook for the U.S. economy, prospects for more economically sensitive sectors, particularly for copper and energy, are brighter and not fully reflected in current valuations.
• Crude oil prices (WTI and Brent) remain elevated due to rising tensions between Western nations and Iran. In addition, Syria’s refusal to bow to international pressure has marginally increased the likelihood of military intervention. A worsening of these two somewhat related situations would inevitably push crude prices higher and present downside risk to equity markets.
• Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
• Gold’s multi-year rally has paused of late but we recommend adding exposure on further weakness; gold bullion and gold equities should perform well in the current environment.
• For fixed income exposure, the current low rate environment offers little value in the mid to long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.

Summarized by Steve Uzielli – Director, Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved.

® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.
Here’s What We’re Thinking

• Equity markets declined further last week on continued macro-economic concerns; news early in the week that the IMF (International Monetary Fund) had approved a new credit facility to fund short term liquidity shortfalls for “qualified” countries caused a brief bounce in stocks but the festering euro debt issues ultimately drove markets lower.
• German Chancellor Angela Merkel remains intransigent on the issue of creating euro-area bonds or using the ECB as the lender of last resort, thus prolonging discussions on finding a lasting resolution to the European debt crisis.
• Although we remain confident this euro-crisis will ultimately be resolved, time lines are uncertain and we expect stock market volatility to continue, resulting in equities trading in a narrow range for the foreseeable future.
• Some optimism has surfaced due to talks supportive of some form of “fiscal union” among eurozone members although there remains much skepticism on this subject.
• Part of last week’s declines were prompted by Chinese factory data indicating the manufacturing sector declined the most since March 2009, increasing concerns surrounding economic growth in one of the world’s most crucial regions.
• Yesterday global stock markets rebounded in a likely temporary relief rally supported by short-covering, thus merely returning stock prices back to prices seen a week prior.
• Stocks were also fueled yesterday by encouraging reports of Black Friday retail sales which increased 7% from last year, implying to some a positive Christmas selling season for retailers.
• As was the case during recent weeks of market declines, yesterday’s bounce was achieved on relatively light trading volumes, implying a continued lack of conviction by investors.
• Equity markets will likely be guided this week by some major U.S. economic data releases and the success, or not, of several scheduled European bond auctions: Italy held a successful auction yesterday, and more this morning, but at significant cost as 2022 bonds were sold at 7.56%, up from 6.06% when the same bond was sold only one month previously. Last week, Germany, the strongest credit in Europe, was unable to sell their desired allotment of new bonds at auction. Spain and France will also be issuing new bonds later this week.
• Yesterday debt rating agency Fitch reaffirmed the AAA rating on U.S. debt, but also changed their outlook to negative from stable.
• Today finance ministers from the eurozone meet in Brussels to discuss the merits of using the EFSF (European Financial Stability Facility) to insure a portion of certain sovereign bond issues with guarantees.
• In light of this macro back-drop, we expect this short term rally will be short lived and that Canadian and U.S. equity markets may extend the recent downward move; however, market technicals suggest investors be prepared to add equity exposure should we experience another 5%+ decline.
• Investors have been largely risk-averse during the recent period of market weakness and cash positions remain high among both institutional and retail investors. December 1 and 2 are big coupon payment and/or maturity dates for North American bond investors which could create a short term increase in buying as investors seek to replace low yielding fixed income investments with higher yielding equity alternatives.
• Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats; and the steady dividend income generated will remain an important component in portfolio total returns.
• Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
• For fixed income exposure, the current low rate environment offers little value in the mid to long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.
• For trading oriented investors we recommend selective profit taking as certain stocks have demonstrated significant outperformance recently.
• Gold’s multi-year rally has paused of late but technically looks very attractive. Both gold bullion and gold equities should perform well in the current environment.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.

Summarized by Steve Uzielli – Director, Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved.

This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

The Globe and Mail, Monday, November 28, 2011

Mid-life brings a new set of financial planning realities: we may be less flexible, but we know ourselves better. We’ve usually accumulated some assets, but we may no longer have the time or energy to bounce back if things go off course.

Working with a financial advisor can help ensure things stay on track. “A lot of people think they can do it on their own, but the transition to retirement is a very important time,” says Bev Moir, a wealth advisor with Scotia- McLeod.

At this stage of life, she says, people often have some experience accumulating money, so they may feel more confident about managing it on their own. “But they don’t have experience drawing those assets down. Mistakes made at this point in life can be extremely costly.”

Advisors can help those approaching retirement find the answers to the two fundamental questions that will largely determine the comfort and security of their last decades, says Dave Ablett, director, Tax and Retirement Planning, Investors Group. How much will they need each year in retirement to live on? How long can they expect their investment assets to last?

Knowing the answers to these questions before retirement provides an opportunity to address any shortfall, says Mr. Ablett. “There’s still time to increase their level of savings. They may have to delay retirement for a year or two, or downsize their home. Only by knowing what you need can you determine whether you need to take these kinds of actions.”

Determining the cost of retirement starts with articulating your desired lifestyle, says Ms. Moir. “Does your retirement involve spending some time alone, with friends or a significant other? What do you want to accomplish? It’s important to have a plan.”

A financial advisor can then help define the costs associated with that lifestyle, as well as any unexpected events that may occur, such as illness requiring long-term care. “One of my clients developed Alzheimer’s in her early 60s and eventually had to be cared for in an institution. She and her husband had saved well, but neither of them anticipated that they would be funding two households,” Ms. Moir says.

The financial planning process can also help address challenges created by the low interest rates and stock market volatility of the last 10 years, protecting capital while making income available.

“One strategy is ‘laddering’ bonds or preferred shares to mature each year, so that even when the market is down in value, money is available to meet income needs. It’s not dependent on timing volatility in the marketplace,” says Ms. Moir.

In the absence of a financial plan, a common mistake is to be excessively income-oriented. “People think they’re going to need money for their retirement, so they invest too much in bonds or GICs,” she cautions. “They forget their retirement could last 30 years. It’s important to have some potential for growth in the portfolio, but it is possible to choose less volatile options, such as dividend stocks.”

Being clear on the fixed and variable expenses associated with retirement also helps investors understand their investment return requirements, says Mr. Ablett. “If you have a handle on what you need in retirement, you can ensure you have enough guaranteed income to pay for all of those fixed expenses.”

If there is a shortfall, assets can be converted into a guaranteed payment stream such as an annuity. “You can then use your other savings to finance the non-essential expenses you have, such as entertainment, travel, charitable donations and gifts,” he says.

Steve Geist, president of CIBC Asset Management, says, “We are all going to retire at some point, but an advisor can design a customized retirement plan, tailored to your comfort level.”

Working with the right financial advisor – one with whom there is a personality fit and a level of confidence – is particularly valuable when markets are uncertain, he says.

“No one likes a bad day in the markets, but a trusted advisor can help protect investors from potential damage created by short-term emotional swings. There is a lot of data that shows that the discipline that comes from working with an advisor is worth its weight in gold,” Mr. Geist adds. “Research shows that whatever measure you apply, Canadians who have advisors are vastly better off in managing towards long-term investing goals.”

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

Here’s What We’re Thinking…
· If investors were able to consider in isolation recent U.S. economic statistics, corporate earnings, improving profit margins and strong balance sheets, all collectively known as “fundamental data”, current stock prices would be seen as exceedingly attractive; regrettably, in the current environment, fundamentals continue to be superseded by macro concerns.
· Although fundamentals will matter eventually, our cautious outlook remains the same for now from a trading perspective.
· Canadian and U.S. equity markets may extend the recent downward move (down 6%-8% over the past two weeks), but market technicals suggest investors be prepared to add equity exposure should we experience another 5%+ decline.
· Global equities continued their decline last week on further contagion fears posed by the European debt crisis and the implications for the global banking system.
· Although the ECB (European Central Bank) has intervened by buying government bonds of weak members Italy, Spain, and Portugal, failure by senior members Germany and France to agree on the ultimate role of the ECB as backstop for the European Union has capital markets remaining anxious. Agreement by Germany on a bailout is not likely forthcoming until they are forced by a severe crisis, not just the threat of one.
· Following the positive news last week of a new pro-austerity government in Italy, Spain elected a majority conservative government on the weekend yet Spanish bond yields still traded at record highs yesterday.
· And despite the failure of the so-called U.S. Congressional “super committee” to reach agreement yesterday on US$1.2 trillion in budget cuts, the U.S. dollar and U.S. treasury bonds remain the safe-haven of preference for global investors, pushing U.S. bond yields lower.
· The absence of an agreement by the super committee leads to automatic spending cuts of US$1.2 trillion over 10 years starting in 2013, half of which will come from the Defense budget. Although supposedly “automatic”, expect the political jockeying to continue over efforts to block cuts, particularly as rhetoric heats up during the upcoming U.S. presidential election year.
· Given this backdrop, investors are showing little appetite for risk and becoming increasingly guarded, evidenced by continued equity and high yield bond selling. Cash positions for both institutional and retail investors are near record levels.
· For fixed income exposure, the current low rate environment offers little value in the mid to long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.
· Although the trend has been down for equities, it should be noted that declines have been on relatively light trading volumes, implying a lack of conviction by investors. Volumes are expected to be particularly light this week as the U.S. effectively shuts down for the week in anticipation of their Thanksgiving holiday.
· We expect equity market volatility to continue and recommend selective profit taking as stocks are trading near the upper end of the trading band established over the past several months. For buyers building longer term portfolio positions, we expect the market will provide a better entry point so there is no rush to buy at current levels.
· One of a few exceptions would be gold which technically looks very attractive. Both gold bullion and gold equities should perform well in the current environment.
· Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
· Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats; and the steady dividend income generated remains an important component in portfolio total returns.
· Given our outlook for an extended period of slow economic growth, whether falling into outright recession in North America or not, equities are expected to trade in a range for the next several years.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.
Summarized by Steve Uzielli – Director, Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved.
This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

Here’s What We’re Thinking…

· Although we wake up to new headlines every day regarding the theatrics occurring in Europe, our cautious outlook remains the same and in the current environment, from a trading perspective, we are more inclined to be sellers than buyers.
· Greece has indeed taken a secondary role relative to Italy this month in terms of attention from capital markets as the political drama unfolding in Rome has captivated its audience of global investors.
· Markets responded positively mid-week after Italian Prime Minister Berlusconi agreed to resign on condition of certain austerity measures being passed; these measures were ultimately approved over the weekend and new Prime Minister-designate Mario Monti is meeting with opposition leaders today to deliberate upon the “many sacrifices” required to address Italy’s dire fiscal position and to get members from other parties to join his coalition cabinet.
· Greece also appointed a new Prime Minister, Lucas Papademos, who must now convince politicians and the people of Greece to stay the course on its own austerity measures and that they have no choice but to remain inside the eurozone.
· Bond yields in Europe reflect the anxiety surrounding the ongoing debt crisis in the region and the risk of spill-over into more senior members of the eurozone. Yesterday Italy sold 5-year bonds to yield 6.29%, the highest since June 1997 and up from 5.32% at the last auction on Oct. 13. This morning those same bonds are yielding 6.84% while French bond yields are also now backing up.
· Germany and France released decent growth data this morning for the third quarter including a 0.4% quarterly increase in French real GDP and a 0.5% sequential increase in German real GDP, both in line with expectations. The Eurozone economy overall expanded 0.2% quarter over quarter in Q3.
· And when the markets move their attention to the U.S. economy they are met with mixed signals: earnings remain solid as we saw with Q3 financial results and economic data points still indicate the U.S. can avoid a recession.
· However concern arises when considering the country’s fiscal situation and the pending November 23rd deadline for US$1.2 trillion in targeted spending cuts from the U.S. Super Committee, a debate fraught with political intrigue and which doesn’t appear headed toward a positive conclusion.
· With all that, U.S. equities have rallied over recent weeks and the benchmark S&P500 Index has returned to near break-even for the year to date.
· In looking at the global economic outlook, it is China and other “emerging markets” which may have a greater impact on growth than Europe. Followers of China have been concerned about the government there fighting inflation with higher interest rates, thus curbing growth and impeding global growth. Last week Chinese inflation data diminished somewhat, leaving room for monetary authorities to ease policy at some point, thus providing potential support for commodity prices which have been under pressure of late.
· Despite the recent strength in the stock market, equities remain the favoured asset class versus bonds which are trading at record low yields. That said, we expect equity market volatility to continue and recommend profit taking to lock in recent short-term gains as stocks are trading near the upper end of the trading band established over the past several months. For buyers building longer term portfolio positions, we expect the market will provide a better entry point so there is no rush to buy at current levels.
· One of a few exceptions would be gold which technically looks very attractive. Both gold bullion and gold equities should perform well in the current environment.
· Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
· Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats; and the steady dividend income generated remains an important component in portfolio total returns.
· Given our outlook for an extended period of slow economic growth, whether falling into outright recession in North America or not, equities are expected to trade in a range for the next several years.
· We are inclined to take some profits on holdings that have performed well. In turn, emphasizing the need to be more tactical in the current environment, this capital could be selectively rotated into stable names that are more reasonably valued. We place particular emphasis on the word “selectively” given the fragile situation in Europe and the anticipated renewed focus on the U.S., and we continue to encourage a focus on larger-cap companies with sound balance sheets.

For more information on how these ideas pertain to your investment portfolio, please contact Danielle or Bev.
Summarized by Steve Uzielli – Director, Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved.
This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

Here’s What We’re Thinking…

• With Italy now taking center stage in the European debt crisis, and the November 23rd deadline for targeted spending cuts from the U.S. Super Committee fast approaching, November will likely prove to be another volatile month for stocks.
• The euphoria surrounding the recent plan to address the eurozone debt crisis quickly faded last week after Greek Prime Minister George Papandreou called a referendum on the European financing package that was effectively a vote on its ongoing membership in the European Monetary Union. Equities firmed later in the week as it became apparent there would be no referendum and Papandreou agreed to step down paving the way for a coalition government. Talks between Greek political leaders to choose an interim prime minister are continuing, but a decision is expected to be reached shortly.
• The brinkmanship between European officials is making matters worse, but should ultimately give way to a series of credible solutions that should address the region’s debt and economic woes. As encouraging as the European agreement so far is in principle, it is clearly just the first step in a multi-step program to resolve the European debt crisis.
• Greece has taken a backseat to Italy over the past week, and is fast becoming the next trouble spot in Europe. The yield on Italian 10-year bonds reached a euro-era record of 6.74% on Tuesday. There has also been a sharp sell off at the short end of the curve with two-year yields also topping 6%. The yield curve is beginning to look a lot like the Greek, Irish, and Portuguese bond curves before things took a turn for the worse. Italy is widely viewed as “too big to fail, too big to bail”. In the end, we believe that Italy has the ability to deal with its problems. The government’s decision to invite inspectors from the International Monetary Fund to supervise its efforts to address its debt problems is encouraging.
• In a surprise move last Thursday, the European Central Bank, now under new leadership, cut its benchmark interest rate by a quarter percentage point to 1.25%. Mario Draghi used this first meeting in his new job to show that he was prepared to be more pro-active than his predecessor.
• Also rocking markets last week was news that MF Global Holdings, the holding company for the broker-dealer run by Jon Corzine, filed for bankruptcy protection after making some bad bets on European sovereign debt. Global securities and investment firm Jefferies Group Inc. (JEF-NYSE) was also dragged into the mud on concerns that it is going to follow in the footsteps of MF Global. The MF filing and 20% drop in Jefferies last Thursday are somewhat reminiscent of Bear Stearns and Lehman Brothers and clearly underscores the fact that investors are on edge.
• On a positive note, fears of a U.S. and global recession have faded. Economic data from both the U.S. and China have been more encouraging, suggesting the U.S. economy will muddle along and China will avoid a hard landing.
• Last Friday’s U.S. job reports proved better than expected, however the Canadian employment report was very disappointing. Canada lost 54,000 jobs in October and the unemployment rate rose to 7.3% according to Statistics Canada. The loss was a surprise to economists who on average had forecast the economy to create 15,000 jobs.
• U.S. corporate earnings season is nearing its conclusion with 88% of S&P 500 companies having reporting third-quarter financial results. Adjusted earnings for the index are U$25.47, representing a better-than-expected 16.5% year-over-year increase. Corporate guidance was more subdued, but third-quarter earnings nevertheless should lend support to this market.
• With the positive news flow surrounding earnings season largely behind us, the market will focus on Europe and the outcome of the upcoming Super Committee meeting on November 23rd. The Committee was tasked with cutting the deficit by U$1.2 trillion over 10 years. If they are unable to reach a deal by Thanksgiving, or if Congress is unable to pass the plan by Christmas, automatic spending cuts will be triggered starting in 2013. Failure would heighten investor concern that the U.S. is incapable of tackling its long-term debt problems.
• Despite the significant stock market rally, equities remain the favoured asset class versus bonds. That said, we expect equity market volatility to continue and recommend profit taking to lock in recent short-term gains. For buyers building longer term portfolio positions, we expect the market will provide a better entry point so there is no rush to buy at current levels.
• One of a few exceptions would be gold which technically looks very attractive. Both gold bullion and gold equities should perform well in the current environment.
• Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
• Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats; and the steady dividend income generated remains an important component in portfolio total returns.
• Given our outlook for an extended period of slow economic growth, whether falling into outright recession in North America or not, equities are expected to trade in a range for the next several years.
• We are inclined to take some profits on holdings that have performed well. In turn, emphasizing the need to be more tactical in the current environment, this capital could be selectively rotated into stable names that are more reasonably valued. We place particular emphasis on the word “selectively” given the fragile situation in Europe and we continue to encourage a focus on larger-cap companies with sound balance sheets.
• For fixed income exposure, the current low rate environment offers little value in the mid to long end of the curve and we recommend investors remain short duration at this time. From a sector weighting perspective, investors should be underweight Canada’s and overweight provincials, municipals and corporates. The recent narrowing of high yield spreads leaves us at a point of indifference on these credits. With the Canadian dollar expected to outperform most major currencies over the coming year, we recommend Canadian investors remain in Canadian dollars for their fixed income holdings.

For more information on how these ideas pertain to your investment portfolio, please contact Bev or Danielle.

Summarized by Paul Danesi – Director, Portfolio Advisory Group

Copyright 2010 Scotia Capital Inc. All rights reserved.

® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.

The Investment Committee of the Portfolio Advisory Group meets weekly to formally discuss markets, sector allocation and investment recommendations. Below is a brief synopsis of our current market view.

Here’s What We’re Thinking…

• Global equities rallied last week in anticipation of and ultimately in response to an agreement announced early Thursday among European leaders on the outline of a plan to resolve the debt crisis in the eurozone.
• We call it an outline as most details are yet to be finalized, but the broad agreement includes 3 key features:
1. Greek bondholders will “voluntarily” write down the value of Greek debt by 50% which will help reduce Greece’s debt load from 150% of GDP down to 120% by 2020.
2. The European Financial Stability Fund (EFSF) will be expanded to 1 trillion euros from the current 440 billion euros through a combination of additional funding from the IMF and possibly a capital injection by China and/or other nations.
3. European banks will be recapitalized to offset the impact of the haircut on Greek bonds.
• On Friday, markets traded sideways after further consideration and second thoughts surrounding the rescue plan and its implications. In Italy, which is widely considered to be the likely next trouble spot in Europe, bond yields have risen above the psychologically important 6% as an indication of continued investor concerns for the region.
• Yesterday, in the last trading session of the month, equities traded lower again; the announcement late in the day that Greece plans to make the new loan agreement from the European Union to Greece subject to a referendum in that country, only encouraged further stock selling before month-end. As Scotia Capital Economist Derek Holt wrote in response to the Greek news: “This begs the question of what kind of market turmoil we would witness should Greeks vote against the loan package with markets already plunging on the news”.
• Although U.S. equities delivered their best monthly performance in October since December 1991, trading volumes were below average, signaling a further absence of investor conviction.
• As encouraging as this European agreement is in principle, it is clearly just the first step in a multi-step program to resolve the European debt crisis.
• Purchasing Managers Index data out of China, a measure of manufacturing activity released overnight, declined to 50.4 in October, down from 51.2 in September and compared with expectations for a third consecutive increase; although still indicating economic expansion, this is the lowest reading of this measure since February, 2009 and will be a cause of concern, particularly for commodity investors.
• While investors were primarily focused on Europe last week, U.S. corporate earnings remain strong and Q3 U.S. GDP growth was reported at a solid 2.5%, up from 1.3% in Q2.
• With 331 members of the S&P500 Index having reported Q3 results to date, 70.1% have reported positive earnings surprises versus the 10 year average of 66%. Q3 earnings are on track for $25.01, a 14.4% year over year increase.
• Despite the significant stock market rally, equities remain the favoured asset class versus bonds. That said, we expect equity market volatility to continue and recommend profit taking to lock in recent short term gains. For buyers building longer term portfolio positions, we expect the market will provide yet another lower entry point so there is no rush to buy at current levels.
• One of a few exceptions would be gold which has pulled back almost US$200/oz. since the highs reached in August. Both gold bullion and gold equities should perform well in the current environment.
• Commodity cyclicals and industrial stocks offer the most upside potential in the event equities rally again, but they also will likely continue to exhibit the greatest volatility.
• Many high quality dividend paying stocks at current levels do not offer much capital appreciation potential but will provide investors with the most downside protection if the market retreats, and the steady dividend income generated remains an important component in portfolio total returns.
• Given our outlook for an extended period of slow economic growth, whether falling into outright recession in North America or not, equities are expected to trade in a range for the next several years. We are inclined to trim some profits on holdings that have performed well. In turn, emphasizing the need to be more tactical in the current environment, this capital could be selectively rotated into stable names that are more reasonably valued. We place particular emphasis on the word “selectively” given the fragile situation in Europe and we continue to encourage a focus on larger-cap companies with sound balance sheets.

Summarized by Stephen Uzielli – Director, Portfolio Advisory Group, Copyright 2010 Scotia Capital Inc. All rights reserved.

This report has been prepared by Scotia Capital Inc. as a resource for its clients and may not be redistributed. While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc. nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of such information. Nothing contained in this report is or should be relied upon as a promise or representation as to the future. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation or particular needs of any specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and implementing investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. The pro forma and estimated financial information contained in this report, if any, is based on certain assumptions and management’s analysis of information available at the time that this information was prepared, which assumptions and analysis may or may not be correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized. Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change without notice. The information and opinions contained in this report have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.

® Registered trademark of The Bank of Nova Scotia, used by ScotiaMcLeod under license. ScotiaMcLeod is a division of Scotia Capital Inc. Scotia Capital Inc. is a member of Canadian Investor Protection Fund.