Market Report: Industry Going Through Transformation

Our industry is going through a transformation and it will be swift and played out over the next 2 to 5 years (in my opinion). I have heard it called a race to the bottom. I am talking about fees that banks, trust companies, insurance companies and Credit Unions charge clients to do business. As with any business the financial industry relies on having customers use their products and services to pay the bills. The race to the bottom simply means the financial industry is lowering the fees they charge customers to use their products and services. Here is what you will see happen over the next few years to make sure companies remain profitable. You will see banks close some of their rural branches. In the board rooms of major financial institutions there is presently and will continue to be plans laid out that will affect every single one of us. If you lower your streams of revenue you must cut costs and be more efficient. Bricks and Mortar cost money and that is why smaller branches will close. When I was a young lad starting out in the grain industry I experienced exactly what we will see happen in the financial industry. A farmer could load up a 3 ton truck and they knew they had a local wood elevator close by to deliver their grain and they knew the local staff as they most likely curled or played hockey together as well.

In a relatively short time the wooden elevators were gone, companies seized to exist and the farms followed suit as many farmers who did not want to expand and change sold out to the large ones. We WILL see that again in the financial industry. Companies who do not adapt to the reality of the changes will not be around very long. I have heard what Investorsgroup’s vision and plans are. I have seen Big banks announcing which branches they are going to close. I have seen credit unions merge. These things do not happen just for the heck of it, it is called survival

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In other news
The Vix fear index peaked at 25 points Friday morning when a man from south of the boarder woke up and decided he should tweet a few threats about Steel and Aluminum tariffs. The BDYI global shipping index has risen to 1,207 points indicating global shipments are increasing indicating an expanding Global market. The lowest gas price in Saskatchewn is 93.9 at The Messenger in Regina. The lowest gas price in Manitoba is 98.3 at the Domo and Husky in Winnipeg. The price of a litre of gas in Edinburgh, Scotland is 2.11 per lire, I threw that in there to make you feel better about the price we pay. The WTI oil price is 61.25 and from what my clients who are in the oil industry tell
me they are BUSY!!!

A quote this week about financial planning and setting goals:
If you want to be happy, set a goal that commands your thoughts, liberates your energy and inspires your hopes!!! (Andrew Carnegie) Stocks and bonds battered by trade and monetary policy comments

March 2, 2018
Global equity markets fell this week after new U.S. Federal Reserve Chair Jerome Powell suggested the U.S. economic outlook has strengthened more than expected. The remarks ignited fears that the Fed could raise U.S. interest rates four times this year, instead of the three times expected by investors. In addition to triggering a slump in stock prices, bond yields stepped higher, which pushed down bond prices and lifted the U.S. dollar versus most other major currencies. Stocks plunged further after U.S. President Donald Trump said he wanted to impose tariffs on foreign metals, including steel and aluminum, a move that would increase inflationary pressures and hinder global trade, perhaps even sparking a global trade war.

In Canada, stocks fell, as did the Loonie, taking their cue from the U.S. monetary and trade policy concerns. Meanwhile, investors kept a wary eye on the seventh round of NAFTA talks as they got underway in Mexico City, as well as Finance Minister Bill Moreau’s delivery of the 2018 Federal Budget in Ottawa. Of the major S&P/TSX sectors, energy took the biggest toll on the index as the stronger U.S. dollar pressured most commodity prices, including oil and both industrial and precious metals. Crude prices tumbled even further after an unexpectedly strong increase in U.S. inventories. The lesser-weighted health care sector posted the steepest absolute decline when Valeant Pharmaceuticals International Inc. forecasted weaker revenue for 2018, and a longer timeline for an expected turnaround.

All sectors of the S&P 500 Composite lost ground. This was led by the materials sector, as well as by industrials, which would be among the worst hit by a stronger dollar and higher costs from a trade disruption. Although Powell talked of a strengthening outlook during his aforementioned testimony – seemingly validated by boom-like readings from consumer confidence and purchasing managers indices this week – a number of other economic data points pointed to slightly slower growth. Fourth quarter 2017 GDP was revised down from an earlier report, and both durable goods orders and new home sales took steeper-than-expected drops.

Major European markets followed their North American counterparts lower, despite signs of ongoing economic strength, including an upward revision to the Eurozone Purchasing Managers’ Index (PMI). Adding to concerns about the Fed and trade wars, Brexit negotiations stumbled over terms of Northern Ireland’s border, and Sunday’s election in Italy brought political risk back into focus. This weekend also brings the results of a vote in Germany aimed at finally establishing a governing coalition, which has been lacking since last September’s election.

In Japan, a stronger yen and worse than expected retail sales and industrial production put pressure on stocks. The yen was one of the few currencies to gain ground versus the U.S. dollar, after the Bank of Japan Governor Haruhiko Kuroda said an exit from quantitative easing might be discussed next year. In China, concern grew that policy will become more of a headwind for Chinese (and therefore global) growth. Moves to allow Chinese President Xi Jinping to stay in office indefinitely will likely dampen resistance to his focus on financial de-risking, environmental protection, and poverty alleviation – all of which could lead to slower nearterm growth.

What’s ahead next week:

· Bank of Canada rate decision
· Ivey Purchasing Managers Index (February)
· Labor productivity (4th Quarter)
· Housing starts (February)
· Building permits (January)
· New Housing Price Index (January)
· Employment report (February)
· Capacity utilization (4th Quarter)
· Market and ISM non-manufacturing PMIs (February – Final)
· Factory and durable goods orders (January)
· Productivity and unit labor costs (4th Quarter)
· Employment reports (February)
· Wholesale inventories and sales (January)

© Melita New Era