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January 2011

January 1, 2011 • Print This Article

President Harry Truman always said that what he needed most was a one-handed economist, so that that person would be literally incapable of giving him an economic forecast and then saying, "On the other hand…"

As we say goodbye to the volatile year of 2010, we look forward to a more balanced 2011.

If anyone had told us that the S&P/TSX index would close the year at 13,443 we would have called it an extremely optimistic viewpoint, yet here we are! The TSX closed up 14.40% year over year, despite some extremely volatile periods. The outcome has been a year of good equity returns and a fairly bullish outlook for 2011.

The global economy remains somewhat unbalanced with continued government intervention and unsustainable spending. However, the equity markets are responding well and fears of a double dip recession are fading. As the year moves ahead it is likely that European fears will mount again, but as we have seen with the recent turmoil in Ireland, investors in equity markets are taking the news in stride and maintaining focus on fundamental valuations and earnings. Though the problems in Greece, Ireland, Portugal and most of Europe remain, and austerity measures will continue to cause some unrest, the European Union will likely survive.

The Global economy will likely expand at a modest pace propelled by the emerging markets. Fears of a major slowdown in China appear to be unfounded as their economy continues to expand rapidly. Inflation in the emerging world will likely lead to tightening, but probably not enough to stagnate economic growth.

The United States Federal Reserve remains more focused on increasing demand than on debt management. We are seeing positive results in terms of consumer spending and overall optimism. However, consumers need to be keenly aware of leverage and as the economy stabilizes over the next few years personal debt levels must be addressed. The public debt must also be addressed in order to avoid future systemic challenges.

Government bonds will likely be an unattractive place to invest in 2011. Yields will likely rise meaning bond prices should come under pressure. Corporate bonds have performed well and will likely continue to offer decent returns.

Equities will likely remain the strongest place to invest for 2011. Valuations are still attractive and even a moderate recovery will have an impact on forward corporate earnings. It should be noted that volatility will continue, but should begin to moderate with positive economic conditions. Technology, energy, materials and industrial stocks should continue with relatively strong performance. Commodities should remain strong which bodes well for the Canadian Market.

Inflation will likely remain in check in the developed economy for 2011, with some concern about deflation. This will likely keep monetary policy accommodative in the United States and Europe. It is likely that we will see interest rates begin to rise in Canada as the year progresses.

Our Thanks!

We would like to sincerely thank our clients for staying the course over this past year. We appreciate how volatile the markets were at times. By focusing on the big picture and concentrating on financial objectives we have weathered the storm very well.

Our focus on large cap, high dividend paying Canadian common shares allowed clients to maintain income flow while riding out market turbulence. As a result, most accounts enter 2011 poised for continued growth. The past year has, once again, proved that a long term, strategic approach to investing helps maintain calm and portfolio valuations.

We believe that the continuity and perspective that the Andras Group has compiled over three generations makes us somewhat unique in the Canadian investment business. We believe that we provide a personalized service that is valued by our clients and produces value for our clients. We look forward to our continued relationship and wish you a healthy and prosperous 2011.

Thank you for your trust in us and we sincerely appreciate your business.

Filed under: Uncategorized

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of Mackie Research Capital Corporation ("MRCC"). The information and opinions contained herein have been compiled and derived from sources believed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. Neither the author nor MRCC accepts liability whatsoever for any loss arising from any use of this report or its contents. Information may be available to MRCC which is not reflected herein. This report is not to be construed as an offer to sell or a solicitation for an offer to buy any securities. Member-Canadian Investor Protection Fund / member-fonds canadien de protection des Ă©pargnants.

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