"Real Estate Bits - 2"

The global economy is moving from recession to recovery, according to Scotia Economics. Massive government stimulus packages, stronger consumer demand, and a pick-up in industrial production are all helping the move to stronger economies.

China and a number of other emerging markets have been leading the way, while the United States, Japan, and major European nations are still struggling with historically high levels of unemployment, weak consumer confidence, and a slow recovery in housing.

In its recent Economic and Market Outlook, From Recession to Recovery, Scotia Economics looks for Canada and the United States to grow by about 3% in 2010. Europe and Japan will lag, but China should continue its blistering pace, growing by almost 10%.

Canada Is Fundamentally Sound

Canada’s domestic economic fundamentals are sound. Our Canadian banking system is widely regarded as the strongest in the world, per capita job losses in Canada during the recession were only half those seen in the U.S., and households and businesses have much less debt than their U.S. counterparts. These factors have supported a rebound in consumer spending and the revival of Canada’s housing market, with buyers taking advantage of historically low interest rates.

Business Is Gearing Up

While Canada and the U.S. reacted differently to the recession, both countries are poised to benefit in the months ahead as a number of public infrastructure projects move into the construction phase. Canadian and U.S. motor vehicle production is also expected to gear up, as auto sales begin to recover. Canadian exporters, however, will continue to face challenges, due to more restrained spending by U.S. customers and the stronger Canadian dollar.

Scotia Economics believes the Canadian dollar will continue its upward trend in 2010 and 2011. The strength in the loonie will be due to a number of factors, including the weaker U.S. dollar, Canada's stronger fiscal position, and a higher oil price. Scotia Economics expects oil to average about US $90 a barrel in 2010. Interest rates are not expected to rise until the latter half of 2010 in both Canada and the U.S. Scotiabank Economics, December 2009

Recovery And Your Portfolio

Regular readers of MyVault News know that no matter what is happening in the economy and the markets, there are always steps you can take today to position your portfolio for the long term. Staying invested is one of those steps.

The market gains in 2009 demonstrated the importance of staying invested, as most of the world’s stock markets gained ground in Canadian-dollar terms. Emerging markets were particularly strong, but Canada’s market also turned in solid performance. Here are some other tried-and-true ways to ensure your portfolio is positioned for recovery.

Build A Diversified Portfolio

Your portfolio should hold a mix of equities, bonds, and cash that matches your investment objectives and risk tolerance.

In 2008, bonds did better than stocks. In the strong markets of 2009, equities outperformed bonds and cash. No one knows for sure which asset class will do better in any given year. That’s why diversification remains one of the best ways to boost returns and reduce market risk.

Invest Globally

Scotiabank believes that developing economies, such as China, will continue to outperform developed nations in 2010.

To take advantage of emerging opportunities and shifting demographics, its important to have some global exposure in your portfolio. This is particularly important for Canadian investors, as our market represents only about 3% of global investment opportunities.

To make the most of your portfolio and take advantage of the economic recovery, speak to your Scotiabank advisor.

Looking to get more from your savings? Contributing smaller amounts on a monthly basis with a pre-authorized contribution plan is a good way to get ahead. Pre-authorized contributions are also a great way to save for your RSP, and for short-term goals such a vacation. It’s easy to set up your plans online or by visiting your Scotiabank branch.

Scotia's team of analysts believes that the worst is behind us as we find some firm footing to keep climbing out of one of the toughest recessions to hit in decades. The trick is to not get overconfident and start thinking that the recovery is going to go straight up. After all, some of the risks that triggered the downturn are still lurking, as are new risks that arise as global policy-makers begin to unwind a lot of the emergency measures that were put into place to avert what could have been a much deeper downturn.

Regards,

Nino Pasquariello.

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