Support, Already?

by Zubin Driver
June 29, 2009

After a jarring beginning to last week that appeared to seal the rally's fate (TSX down 452 points on Monday!), markets found support Tuesday and finished the week on a strong note. Volatility remains high as greater than 1% daily moves are commonplace. Sentiment is being blown about by economic crosswinds, and the persistence of caution continues to make the bull trade the contrarian one that is working for those with the courage to buy on frightening dips.

Through the 1st half of '09, the outlines of a picture have been drawn that is now being coloured in. The rate of economic decline is slowing, and worst fears are not being realised. As long as a new wave of calamitous news doesn't hit markets, the March lows should mark bottom. Yet days like last Monday belie the fact that many participants are still wary that those lows will be re-tested.

Fed Meeting

Last week the FOMC (Federal Open Market Committee) met for two days. As expected given the continued necessity of fostering growth, there was no change in interest rates, which will remain at the historically low level of 0 to .25%. In such meetings, where no change to rates is made, the Fed's statement on the economy is what draws market attention. The Fed firmly endorses, and is one of the most important players in actually drawing, the recovery picture described in the paragraph above. "Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilise financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustained economic growth in a context of price stability." The Fed notes its own efforts in the recovery via 'policy actions' and 'fiscal and monetary stimulus,' which have been critical to propping up market forces to a point where private sector demand is finally showing signs of life. As confidence is so important to the direction of said market forces, hopefully the fed's stated belief that economies are gradually returning to growth, will be embraced by investors.

The Dormant Ones

A number of trains have already left their stations since December, but some venture stocks are still sitting in an illiquid state at extremely low levels. Particularly if things slow down for summer as they usually do, there will be opportunity to accumulate such companies. When a good piece of news comes out and the stock trades up it usually happens so fast that those who don't own it already have to chase it to much higher prices...

Best regards,
Zubin

Zubin Driver
Investment Advisor
(W) 604 643-7608 / (F) 604 643-7606
Email: zubin_driver@canaccord.com

Canaccord Capital Corporation
Attention: Zubin Driver
P.O. Box 10337 Pacific Centre
2200 - 609 Granville St.
Vancouver, B.C. V7Y 1H2

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OFFICES IN MAJOR CENTRES ACROSS CANADA. MEMBER OF ALL CANADIAN STOCK EXCHANGES AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA. MEMBER CANADIAN INVESTOR PROTECTION FUND (CIPF).