Analyst Insights Market Review — January 2009
Any thoughts of January marking a fresh start for equity markets or economies were dashed during yet another month of gloomy economic data and volatile markets. Perhaps the month’s most anticipated highlight was the inauguration of U.S. President, Barack Obama, but on inauguration day, the stock markets gave a collective shrug, with the Dow Jones Industrial Average losing 4%, closing below the 8,000 point level for the first time since November 20, 2008.
President Obama announced “bold and swift” action on the economy, and promises of specific measures in a new economic stimulus package, including major infrastructure spending. By month’s end, a new US$819 billion economic stimulus package had been passed by the U.S. Congress, but given Republican opposition to the Bill and the fact that some Democrats voted against the measures, there was concern as to whether the package will pass through the Senate.
While many national economies are facing slowdowns or recessions, the U.S. economy is seen as the economy most likely to reverse the downward spiral—but the news from the U.S. was well short of signalling any form of turnaround. With many firms announcing layoffs, only the biggest are now making the headlines, and these included Caterpillar Inc. (total of 20,000 layoffs), Boeing (10,000), Home Depot Inc. (7,000), Sprint Nextel Corp. (8,000), Microsoft (5,000), Starbucks (6,700) and Corning Inc. (3,500). The
In Canada, the Federal Budget included a two-year, $40 billion stimulus package which included tax cuts, infrastructure spending, and specific measures to help support the Canadian financial system.
On the commodities markets, oil had another volatile month, but recovered slightly to close down 6.5% at US$41.68 per barrel. Copper, silver, gold and platinum each had gains for the month, but most are well off their 52-week highs. Gold closed at US$927.85, and its resurgence helped Barrick Gold Corp. become the largest stock by market capitalization on the Toronto Stock Exchange. Former TSX heavyweight, Nortel Networks, filed for bankruptcy protection on January 14, with its stock price declining 99.9% from its high in 2000.
On the Bank of Canada lowered interest rates to 1% - its lowest level since it was founded in 1934 - and also indicated more cuts may be necessary given the economic outlook. Inflation is not currently a threat according to the Bank, with projections that the Consumer Price Index (CPI) will “dip below zero for two quarters of 2009” due to the impacts of declining energy prices.
This article provided courtesy of Credential Asset Management, Inc.
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February 20, 2009
