A September rebound

- "Equity markets rebounded nicely in September, sending the S&P 500 and the S&P/TSX into positive territory for the year to date. However, there is still fog on the recovery track. First and foremost, there is no clear guidance on the extension or otherwise of the Bush tax cuts set to expire at the end of this year. Households remain in limbo as to whether their disposable income will take a hit in three months."
- "Uncertainty about tax policy is weighing on both consumer and business confidence. Volume retail sales have stalled in recent months and investment is decelerating. The ongoing softness of recent economic data has led to a period of downward earnings revisions for both S&P 500 and S&P/TSX. This is likely to last the rest of the year."
- "Fortunately the Federal Reserve has committed to provide more liquidity if needed. The prospect of new round of quantitative easing by the U.S. central bank will in our view guard against a double dip. We continue to see the U.S. economy accelerating in the first half of next year. Our asset mix is unchanged from last month. Equities remain market weight for the time being as we wait for the political dust to settle in the United States."
- "Unconventional action by the Bank of Japan and the Fed’s new commitment to provide more liquidity if needed show a new tolerance for competitive depreciation of national currencies. This significant development argues for relative strength in precious metals. We are upgrading our allocation of gold stocks to overweight. At the same time we are reducing our holdings of Industrials to market weight."

World: Monetary policy eases further

- "Global growth will moderate in 2011. Emerging Asia will remain the driver. With inflation on the whole still tame and, especially, with developed economies slowing, the major Asian central banks are probably not being reckless in giving monetary policy a further expansionary turn."
- "With the U.S. economy halfway back to its previous peak, cyclical forces are fading. A fog of uncertainty about next year’s tax rates is modifying the behaviour of households and businesses. The U.S. is entering a slow-growth trap, with real growth unlikely to exceed 2% annualized in the second half of 2010."
- "The Canadian recovery has reached maturity. Real GDP, employment and domestic demand have all passed their pre-recession peaks. On the other hand, U.S. growth is slowing just when Canada has moved from recovery to expansion and the first signs of cooling have appeared in domestic demand growth. We expect Canadian GDP growth to slow from 3%-plus in 2010 to its approximate cruising speed of 2% in 2011."