Finally, some good News !

Wind of change in the markets...

Dear friends,

In the past few weeks, we have witnessed a wind of change in the financial markets. For those who follow economic news closely, you have probably noticed the recent rebound in markets all around the world. Some of you have asked me why their investments had gone up in the past few weeks and if this was the beginning of a new trend. In response to the these questions, I have outlined below some reasons to the changes we have seen.

The last quarter

First, I should mention that sales of houses in the U.S. have increased significantly last February. And this was not due to sharks buying seized houses at rebates, but simply because of renewed interest from real estate buyers in regions that were not as affected by the real estate crisis. This data is very important because the stabilisation of the housing sector is the key to the economic challenge we are facing. There are still more than 5 months inventory of unsold houses in the U.S. and this chapter is not over yet... but any improvement is useful...

Also, Citigroup has recently announced that it had been profitable the first two months of 2009. Although one company showing improvements is not the determinant factor in the recession we are going through, these results were encouraging to investors who in turn made the price of most financial businesses go up, in the U.S., Canada, Europe and other countries aroung the globe.

Unfortunately, we have also had our share of bad news, especially with employement. Monthly job losses average beween 500,000 and 800,000 in the U.S. However, the increase in unemployment was already anticipated by investors (already reflected in share prices) and therfore did not result in a further plunge in financial markets.

Also, American consummer expenditures increased slightly in the first quarter, following a catastrophic fourth quarter, the worst in 28 years.

On the credit crisis matter, two important signals have attracted my attention. First, the "London Interbank Offer Rate (LIBOR)", more specifically the rate at which large global banks lend to one another, has continued its decrease. This factor is important because it denotes an improvement in confidence towards financial institutions. We have to understand that credit can be compared to the oil in the engine of your car. If banks increase their lending activities amongst themselves and with individuals and businesses, the engine of the economy will start to function normally again.

The 2nd positive signal, credit spreads (spread between the rate at which a business can finance itself and the rate at which governements can obtain credit) has also narrowed in the past few months. This also demonstrates a gain in the confidence of investors who now require a smaller risk premium to lend to businesses.

Will this trend continue? Most experts disagree on the matter but the quarterly earnings season starts next week and will be determinant to answer this question.

I am always avalable to give you more information on the markets and help you, especially in this period of market turbulence we are going through.

I hope you have appreciated these good news.

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