Have a great week, Jim.

www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                   % Increase
TSX………… +173=> close 13,972                                 +1.2%                   
DOW………. +164=> close 12,506                                 +1.3%
S&P 500…..   +17=> close 1,337                                   +1.3%
NASDAQ…..  +55=> close 2,820                                  +2.0%

There is little doubt that corporate cost cutting after the 2008 collapse has helped to create an above average earnings recovery but recently we have also been seeing  top line (revenue)  growth  beating expectations.  Even as the emerging markets are hiking rates and attempting to slow their economies, revenues have been increasing in corporate America.

WHAT IT MEANS:
The top line numbers are a reflection that the American economy is recovering at a faster rate than anticipated.  The American consumer is still the most powerful economic force today.  The market’s ability to recover without any substantive input from them is a testament to the strength of the emerging markets.  If the Americans have finally joined this recovery then this should add strength to the rally.  Currently the S&P/TSX is trading at about 15.7 times forward earnings.  This is slightly above the long term average of 15.3.  However interest rates are at historic low and the earning yield for the S&P/TSX is about 6.4%.  Both these indicators suggest that the market is not yet overpriced but the easy money has already been made.  Buy the dips.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                  % Increase
TSX………… -409=> close 13,799                                  -2.88%                 
DOW……….    -39=> close 12,341                                  -0.3%
S&P 500….      -8=> close 1,320                                    -0.6%
NASDAQ…    -16=> close 2,765                                     -0.5%

The old adage “sell in May and go away” seems to be causing a great deal of anxiety amongst the short term traders.  If we go back to 2010 the TSX had a short term peak on April 26^th at a level of 12,281.  The remainder of the summer saw a trading market that eventually bottomed out on July 5^th at a level of 11,092 (drop of 10%).  Since then of course the market has moved up to a peak of 14,253 on April 3^rd of this year. 

WHAT IT MEANS:
Seasonality is a reality in the market.  Last year was a good example of this seasonality and although you would not have been hurt just hanging on, short term traders will tend to try and pick up extra returns by trading out in late April and then hoping not to miss the move up later in the summer.  For now my longer term bullish opinion has not been altered.  The commodity cycle and Canada still has a long way to go.  The gradual resurgence of the American consumer is picking up steam and in the next couple of weeks I think we will continue to see positive earnings momentum.  Until I see evidence to the contrary, I am happy to remain bullish.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                    % Increase
TSX…………  +91=> close 14,130                                       +0.6%             
DOW………. +157=> close 12,377                                       +1.2%
S&P 500…… +18=> close 1,314                                       +1.4%                                  
NASDAQ….  +46=> close 2,790                                        +1.7%

The correction in the market seems to have run its course.  With large amounts of capital still looking to come into the equity markets pullbacks should be viewed as buying opportunities.  I do expect a rocky road, particularly over the summer months, but my long term bullish argument for equity markets were clearly not derailed by short-term geo-political events.

WHAT IT MEANS:
March was the first losing month since this rally began last July.  The only surprise here is that it took so long for it to occur and it was allot shallower than I expected.  Nonetheless, this pullback is a healthy sign for what is a strong market.  I believe that the North American equity markets will continue to move higher in 2011 and I would prefer companies that have exposure to energy or the emerging markets.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                  % Increase
TSX………… +250 => close 14039                                  +1.8%                 
DOW……….  +362 => close 12220                                  +3.0%
S&P 500….     +35 => close 1314                                    +2.7%                                      
NASDAQ….     +99 => close 2743                                  +3.7%

I am not sure what is going to happen this time around, but I get the feeling that this correction is not over. Make no mistake, this is a bull market, but unlike the run between March 2009 and March 2011 this will be a lot more choppy, so having cash available to buy the dips becomes more important. 

WHAT IT MEANS:
Last week we had a plethora of bad news; the Middle East, European debt, Japan, inflation in emerging markets, weak housing and labor numbers in the United States.  It is this onslaught of bad news that has me optimistic about the market. But with stocks trading close to their two year high, the market could easily fall over the next few months.  I would certainly be buying on dips.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                  % Increase
TSX………… +116 => close 13,789                                     +0.8%             
DOW……….   -186 => close 11,858                                     -1.5%
S&P 500……   -25 => close 1,279                                        -1.9%
NASDAQ…..    -71 => close 2,644                                       -2.6%

My favourite indicator, the price of copper, rallied off its year lows to close back up in the $4.30 range on speculation that the rebuilding efforts in Japan will cause a reacceleration in the demand for commodities.

WHAT IT MEANS:
We have been due for a correction in this market for some time.  The negative headlines are now front and centre and are likely to continue.  What has been lost in this pessimism is the good economic news coming out of the United States.  At the conclusion of last week’s Fed policy meeting, the U.S Federal Reserve decided to leave the target for the Fed funds unchanged; “… economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations are likely to warrant exceptionally low levels for the fed funds rate for an extended period……….the economic recovery is on firmer footing, and overall conditions in the labor market appear to be improving gradually”.

With low interest rates, subdued inflation and increasing earnings, my long term view of the equity markets remains bullish. The short term correction that is occurring should be viewed as a buying opportunity.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                    % Increase
TSX………… -579=> close 13,674                                       -4.0%             
DOW………. -121 => close 12,044                                      -1.0%
S&P 500….   -17=> close 1,304                                          -1.2%                                   
NASDAQ…    -60=> close 2,715                                         -2.1%

The price of copper has pulled back below $4.10/pd.  In the short term this is an indication that the emerging markets (particularly China) may be cooling off.  The Chinese government has taken many steps to slow down the economy and has publically stated that it would like to see a 7% growth rate in contrast to the current level of about 10%.

WHAT IT MEANS:
We have been preparing for this correction for about a month now.  It is now time to prepare your shopping list for the bargains that are likely to occur in the coming weeks.  In times like this it is important to review your long term view of the market and determine if any of the current events have altered your outlook.  For instance, the increasing price of copper has been driven by high demand from the emerging markets but also from the shortage of new supply.  The supply issue has not gone away nor will it in the short term.  Demand for commodities may be erratic but in the coming inflationary times the demand for hard assets tends to increase. Relative prices of equities seem to indicate that we are not overvalued, as we were 2000 or 2007.  Interest rates and inflation are at low levels in North America however they have started to increase in the emerging markets and expectations of increases in North America may cause some problems.  In the end, this market has moved up far too quickly and this correction is good for the longer term health of the market.  Pick your entry level. Move money into equities in stages. Have your stock list ready.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                  % Increase
TSX………… +201=> close 14,253                                      1.4%               
DOW……….    +39=> close 12,170                                      0.3%
S&P 500…….    +1=> close 1,320                                        0.0%                                    
NASDAQ….      +4=> close 2,785                                        0.1%

After earnings bottomed in 2008, corporations cut jobs and expenses in order to improve their balance sheets.  As we recall, there was an overriding concern that they had no access to capital, so survival was dependent on cash flow and managing debt.  Now that the American recovery is starting to take shape and the consumer is gaining confidence, this has translated to better margins and a stronger bottom line for North American corporations. 

WHAT IT MEANS:
On the surface, we have the characteristics of a bull market that has many years in front of it. However, in the short term, I do see causes for concern.  On Friday, the TSX gained 38 points. The problem was that of the 10 sub-indexes that make up the index, only 2 rose: Energy and Materials.  I also like to keep an eye on the volatility index (VIX); it has been on the rise since mid February.  Increases in volatility have a high correlation with negative markets. Trying to time a short term correction can be costly.  I believe that traders will be looking at two key figures:  the old high set in 2008 (15,073) and the 200 day moving average of the index (approx 12,500).  Clearly there is more downside than upside, so I lean toward the safe approach and become cautious.  A move outside of this range will determine the next leg of the market.  

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

MARKETS:
WHAT HAPPENED                                                    % Increase
TSX…………  -71=> close 14,052                                        -0.5                        
DOW………. -261=> close 12,130                                        -2.0
S&P 500…… -23=> close 1,320                                          -1.7
NASDAQ….   -53=> close 2,834                                          -1.9

If I can take you back to about this time last year, you might recall that the Greek revolt was going to threaten the European Union.  This revolt was closely followed by similar actions in Ireland, Portugal, and to a lesser extent Spain and Italy. This unease seemed to be the catalyst or at least the excuse for the decline in markets that started last spring and ended in July.  More often than not political events do not significantly impact the global economy and can create a buying opportunity for the investor with a longer term view.

WHAT IT MEANS:
Last week’s pullback was mild by any standard.  “Bloomberg reports the stretch since July 2 has been the longest in which the market rose 30% and has had so few 1% dips along the way (13).” At this point of the market cycle, I like to focus on risk management. 2011 is the third year in the current market cycle.  From a fundamental viewpoint we continue to see accommodative government policies, a strengthening North American/European consumer, continued growth in the emerging markets, increasing corporate profits and relatively low stock valuations.  This market is heading higher, however we are vulnerable to a near term correction. It may be time to raise a little cash or if you’re like me and have a very long term view, then switch some money from growth stocks to less cyclical stocks that have a lower correlation to market moves. The time to start becoming defensive is when the market is rising.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).

The good news in Canada doesn’t stop with profits.  Inflation appears to be benign with consumer prices rising 2.3% year over year, less than the expected 2.4%. This raises the likelihood of continued low interest rates well into 2011 and beyond.

WHAT IT MEANS:
In North America we are seeing expanding profits in a slow growth low inflation environment.  Low inflation translates into low interest rates and all this translates into bullish equity markets.  The problems occur when you start to look beyond the North American borders. The Chinese government once again raised the reserve requirements in an attempt to cool off its overheating economy.  Meanwhile, Producer Prices  in Germany jumped by almost double the expected rate.  The problems in the Middle East continue to escalate and could cause some short term volatility.  This market is overdue for a correction, so it may be prudent to start taking some profits and move funds into defensive assets.

Have a great week, Jim.
www.yourcfo-ottawa.com
613-224-5075

yourCFO Advisory Group Inc. is a member of the Canadian Investor Protection Fund (CIPF).