August in Review

Indices this month posted solid gains, as investors headed into the last of their summer holidays. U.S. equity markets closed significantly higher, gaining 3.71%, its best monthly performance since February. Canadian equities rallied 2.09% and are up 16.86% year-to-date, outperforming most developed markets.

U.S. and Canadian stock markets reach record highs – but who’s celebrating?

The S&P 500 Index and S&P/TSX Composite Index, which represent the U.S. and Canadian stock market respectively, reached all-time highs in August. The precipitating factors for this boost were the strong signs of economic recovery in the U.S. in combination with the U.S. Federal Reserve Board asserting they are in no rush to raise interest rates. However, geo-political unrest outside of North America has caused investors to stop short of throwing a parade.

Oops! Statistics Canada revises July jobs figures.

A week after the announcement of a calculation error, Statistics Canada released revised jobs figures in August. Canada added 42,000 jobs in July, not the 200 originally reported. The discrepancy comes from the number of full-time jobs created which was originally reported as a loss of 60,000. “In my over two decades of experience in this business I struggle to think of a comparable foul-up anywhere in the world,” said Derek Holt, Scotiabank’s Vice President of Economics.

Burger King reached agreement to snap up Tim Hortons.

With financial support from investment mogul Warren Buffett, 3G Capital, the controlling shareholder of Burger King Worldwide Inc., announced a $12.5 billion deal to acquire the beloved coffee maker. The deal would form the world’s third largest fast-food chain that could rake in $23 billion in annual revenues. The brands would operate on a standalone basis. However, the head office of the combined company would be located in Canada, which would lessen the tax implications of repatriating worldwide earnings.

German bond yields hit record low.

For the first time ever, German bond yields dropped below 1% last month – meaning bond holders are earning close to nothing when factoring for inflation. With weak economic growth emerging from the eurozone’s largest economy – a contraction of 0.2% in Q2 – and very low inflation, Germany is looking less likely to avoid economic stagnation without implementing monetary policy measures similar to the U.S., U.K. and Japan.

What’s going on with oil?

With the recent turmoil in Eastern Europe and the Middle East, the world’s largest oil producing regions, it is contradictory to supply and demand theory that the price of oil has not risen dramatically. However, over the past year the price per barrel of oil has declined by 10.86%. The reason: relentless North American supply. While low crude prices are good for consumers at the pumps, it is cause for concern to Alberta oil sands producers who, in some instances, require prices as high as $150/barrel to turn a profit.