Dec 28, 2016
BNN's Daily Chase: Loonie gets left behind as oil nears annual highs
By Andrew Bell
We’re wrapping up a year full of surprises on BNN today and looking forward to a 2017 that’s likely to bring turmoil on the U.S. political scene and, perhaps, markets.
Veteran Globe and Mail contributor Brian Milner told us this morning that Donald Trump’s presidential administration is likely to be chaotic, with an individual in charge who has little interest in the complexities of policy.
At 2:30 p.m ET, we’re joined by Hugh Johnson, chief investment officer a Hugh Johnson Advisors. Shortly after Trump’s Nov. 8 election victory, he said the President-elect’s plan to slash taxes doesn’t look like it will win approval. “If you look at the numbers, it infers an increase in our deficit, and increase in our debt [that] I don’t think it will be acceptable to either party, Democrats or Republicans,” Johnson said. “We’re talking about moving the deficit of 2.4 per cent of GDP, which is where it is now, up to six per cent of GDP. Even though that’s lower than during the recession in 2008, it’s still too high.”
BOND YIELDS AND RISK
Our 9:20 a.m. ET guest, Richardson GMP chief investment officer Craig Basinger, is warning investors to beware of rising bond yields and the risk of dips in the stock market as investors factor in the higher cost of borrowing. “One day we will wake up and the market will all of a sudden care about the impact of higher yields,” he says but adds: “We would view [that] as a buying opportunity given earnings growth, the economy and a host of factors that continue to favour a continuation of this bull.”
Energy stocks on the TSX have produced a rich return of 40 per cent for investors this year, well above the 21.2 per cent total payoff from the stocks in Toronto’s composite index.
RISING OIL
North American oil has traded today around US$54 this morning while international Brent futures are near highs hit during the summer of 2015 but the Canadian dollar, which is traditionally lifted by strong energy prices, is stuck under 74 cents. A weak Canadian currency and strong oil prices hold out the prospect of more gains in energy shares because they mean a double win for domestic producers.
At 11:05 a.m. ET, we’ll get a sector outlook from Martin King, director of Institutional Research at GMP FirstEnergy. He told investors in mid-December that the crude “market has been effectively balanced for most of the summer and fall” and that “prices will firm further in 2017, supported by OPEC production cuts.”
