Fall - RBC Direct Investing
Transcript of Fall - RBC Direct Investing
FALL 2012 A qUARTERLy EDUCATIONAL NEwSLETTER FOR CLIENTS OF RBC DIRECT INvESTINg INC.
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In this issueMarket Outlook
New! Lifestyle stock screeners
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More exciting changes on the way
At RBC Direct Investing, we’re always listening to you and developing innovative ways to better meet your needs — like the new research content provided by Morningstar. Watch for news of the latest enhancements and improvements in upcoming issues of Direct Investor and on our online investing site.
Bringing you more robust market research with MorningstarAs we continue to enhance the resources available to our clients,
RBC Direct Investing™ is pleased to introduce a robust suite of equity, options
and exchange-traded fund (ETF) research content provided by Morningstar‡.
This new research replaces the current Standard & Poor’s‡ research and
complements the Morningstar mutual fund research already available to
our clients.
This new content will provide you with access to a wide range of stock reports for
Canadian and U.S. companies along with Canadian and U.S. ETF research reports,
credit ratings for stocks on the TSX 60 and S&P 500, and Morningstar Pick Lists.
About MorningstarMorningstar Inc. is a leading provider of independent investment research in
North America, Europe, Australia and Asia. The company specializes in providing
world-class, analyst-driven investment research and insights on all major
asset classes for individual investors, professional financial advisors and
institutional clients.
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Ranked #1 in clientservice by Dalbarfor the 5th consecutive year∆
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Morningstar’s unique equity research philosophy is based
on two core factors: providing accurate valuations of
companies over the long term and identifying companies
with sustainable competitive advantages.
Enhanced research capabilitiesHere’s a look at what Morningstar content you will have
access to and how it can help you make better investment
decisions.
Stock reports. Morningstar provides analysts’ reports on
thousands of companies listed on Canadian and U.S.
exchanges, bringing you analysis on current and historical
prices, earnings, debt, management teams and more.
ETF research reports. These new reports make it easier for
you to research and compare Canadian and U.S. ETFs.
Credit ratings. Covering more than 700 companies, these
ratings provide you with Morningstar’s take on how likely
a company is to default on its debt obligations.
Stock reports, ETF research reports and credit ratings can be
found in the Detailed Quotes in our online investing site.
Canadian Research Highlights. The Morningstar Canadian
Research Highlights replaces S&P’s Outlook. Morningstar’s
analysts assess the Canadian market and identify key
companies to monitor across a range of sectors and
industries — a great source of investment ideas.
Economic Insights Report. This weekly article presents
the latest analysis on the state of the U.S. economy along
with forward projections.
Pick Lists. Replacing S&P Model Portfolios, there are six
Morningstar Pick Lists: Canadian Core, Canadian Income,
Tortoise & Hare, U.S. Large-Cap Core, ETF Analyst Favourites
and Pay Me Now Options. For each, Morningstar analysts
identify investments that best fit the Pick List's strategy.
You can use these as model portfolios or as ideas lists to help
you build your own portfolio — the choice is yours.
Canadian Research Highlights, Economic Insights Report
and Pick Lists can be found on the Market Insights page
under the Markets tab of our online investing site.
Alerts. In addition to setting alerts for price changes, news
and specific events, you can now set alerts for the release of
analyst research reports or rating changes from Morningstar.
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Exclusive Morningstar content for Royal Circle and Active Trader clientsWith the switch to Morningstar as our primary provider of independent investment research, Royal Circle® and Active Trader clients will have access to the following exclusive content:
Morningstar’s U.S. Quarterly Market Outlook. Provides forward-looking analysis on the economy, credit market and sectors (which includes Morningstar’s top stock picks).
Research Highlights. A weekly article summarizing Morningstar’s best ideas within its coverage universe.
U.S. Stock Strategist Series. A weekly article covering a range of topics such as company-specific news, sector and industry trends as well as market trends.
U.S. Stock Strategist Industry Report. Provides commentary on growth prospects and competitive advantages of more than 90 industry groups as well as comparisons of companies within each industry.
All of this new content can be found on the Market Insights page under the Markets tab of our online investing site.
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Market OutlookProvided by RBC Global Asset Management Inc. on September 14, 2012
There are two distinct ways of looking at recent events in
the global economy — the pessimistic view and one that
holds out more hope for the future. On the pessimistic side,
a lack of clarity in Europe, slowing growth in China and
uncertainty stemming from the U.S. election and the
approach of the fiscal cliff continue to hang over the
global economy. Consumer activity is slowing, prompting
businesses to reduce inventories, stockpile cash and, for
the time being, rein in capital investment and hiring. In our
view, all of this bad news is primarily short term in nature
and, thus, we tend toward a more optimistic interpretation
of recent events. Several of the chronic dysfunctions that
have long held back the economy are beginning to
normalize. This is true of U.S. housing, credit, and, to a
lesser extent, employment. Corporations continue to deliver
strong earnings, and valuations have edged higher.
Financial markets seem to agree with our more positive
view, with equity prices up materially over the summer.
Global economy slows, but progress being made The most obvious challenge to this favourable view has
been the deterioration of economic conditions since the
spring. Europe has descended into outright recession,
which we expected, although we were somewhat surprised
by the slowing momentum in emerging markets after years
of strong growth. These economies continue to post
substantially higher growth rates than the developed
world, but the major players — from China to India to
Brazil — have all slowed considerably.
A key risk to the global economy continues to be the crisis
in Europe. There remains an enormous amount of work left
to be done across the Eurozone, some of which will take
years to accomplish. In the meantime, market concerns will
ebb and flow. We continue to believe a benign end game will
eventually be achieved, in which no major bank fails, no
large country defaults and the Eurozone remains intact.
Economic data has begun to stabilize thanks in part to
efforts by policymakers. A handful of countries have
introduced fiscal stimulus, and more is likely from virtually
all of the major players. Many nations and regions have
recently delivered additional monetary stimulus as well. As
a result, after being stuck in negative territory throughout
the summer, economic surprise indexes are now steadily
working their way higher and are on the cusp of turning
positive. This is partly due to tentative signs of economic
stabilization, and partly to the fact that economists have
finally caught up to the new state of affairs and are
downgrading their expectations.
We have reduced our own economic forecasts, but to a much
lesser degree than the consensus outlook. Our tweaks are
moderate for three reasons. We believe the recent economic
deterioration is at least partially seasonal in nature, and thus
temporary. We have confidence that policymakers will help
revive growth. And we resisted the earlier euphoria that had
prompted many to upgrade their economic forecasts, leaving
less need to downgrade them now. With few exceptions, our
forecasts remain modestly below consensus.
U.S. Dollar is attractive, especially for longer-term investorsSolid fundamentals support the U.S. dollar and strengthen
our belief that the turn in the long-term dollar bear market
has occurred. The dollar’s allure stems from attractive
valuations and demographics, rising energy production,
a slowdown in emerging-market reserve growth and the
relative attractiveness of U.S. assets. For the time being,
the U.S. dollar also continues to offer safe-haven qualities
that are valuable for risk-carrying portfolios. There is no
need to rush into the dollar, however. Volatility driven
by headlines or positioning will provide entry/re-entry
opportunities to prepare for the next bull phase of
the dollar cycle. The longer an investor’s time horizon,
the more attractive the dollar becomes, and the more
comfortable investors should be about holding assets
denominated in it.
Rates at rock bottom, but yields cannot stay low foreverGlobal bond yields are beginning to fluctuate after spending
several months trading in a fairly tight range as expectations
of more monetary stimulus, combined with European
worries, have managed to dislodge the market. Broadly
speaking, very low bond yields continue to make sense in a
world of slow growth, moderate inflation, risk aversion, low
policy rates and unconventional central-bank actions. That
said, yields cannot remain this low forever. The question,
then, is primarily one of timing. Our sense is that 2013 could
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usher in moderately higher bond yields as policy clarity
improves and as global growth begins to revive. But an
outright tightening of monetary policy is still years away
for most countries, and so relatively low government bond
yields are likely with us for some time.
Equities rally through the summer, but valuations remain supportiveInvestors continue to trade largely in response to
macroeconomic events. Negative news flow from Europe
has been mostly absent in recent weeks, keeping volatility
low and allowing major equity markets to trend higher
despite the murky economic environment. Valuations have
also edged up but remain quite reasonable. In the U.S., for
example, a 14 multiple for the S&P 500 is close to one
standard deviation below fair value. Corporations have
proven themselves to be very resilient through the current
cycle, cutting costs and shoring up balance sheets in the
face of a slowing global economy. As a result, earnings
continue to surprise to the upside. However, although
corporate profits look strong on an absolute basis, year-
over-year earnings growth is beginning to slow. Companies
are citing slowing business in Europe as the cause for lower
profits and many are facing currency-translation losses on
foreign revenue due to a weakening euro. Ultimately, we
believe these and other issues threatening the recovery will
be resolved. As clarity and confidence begin to improve,
valuations should re-equilibrate to match the strong
corporate fundamentals, leading global equity markets
to outperform over the long term.
Reducing equity overweightWhile global uncertainty and sluggish economic growth
remain key factors in our assessment of markets, we believe
that prospective returns to equity investors are attractive
and remain overweight stocks as a result. However,
matching the 10% equity-market advance of the last three
months will require considerable progress toward resolving
the various structural headwinds still facing the global
economy. Accordingly, we have dialled back our overweight
in equities somewhat, adding the proceeds to cash. We
recognize that bond yields are likely to stay far below fair
value as long as ultra-low interest rates are a necessary
element of minimizing the likelihood of a “tail risk” event
and, at the same time, encouraging the healing that is
essential to restoring a normally functioning, self-sustaining
economy. Signs of balance returning to global conditions
will eventually send yields higher, resulting in capital losses
for fixed-income investors. For a balanced global investor,
we recommend an asset mix of 58.5% equities (versus a
neutral level of 55%), 35% bonds (versus a neutral level of
40%) with a balance of 6.5% cash.
RBC Investment Strategy Committee’s recommended asset mix by investor profile+
Very Conservative Conservative Balanced Growth Aggressive Growth
Cash 6.5% 6.5% 6.5% 6.5% 3.8%
Fixed Income 71.7% 55.5% 35.0% 19.6% 0.0%
Canadian Equities 10.4% 15.5% 20.5% 25.5% 34.8%
U.S. Equities 6.2% 12.0% 21.9% 27.0% 31.9%
International Equities
5.2% 10.5% 12.3% 16.0% 21.9%
Emerging Markets 0.0% 0.0% 3.8% 5.4% 7.6%
+ Complete RBC Investment Strategy Committee’s Global Investment Outlook including the definitions of investor profiles can be found on the Market Insight page under the Markets tab on your RBC Direct Investing site. Data as of September 14, 2012.
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New! Lifestyle stock screenersStock screens traditionally focus
on fundamentals like earnings,
debt, key ratios and so on.
This innovative screener,
developed by Morningstar
and available exclusively to
RBC Direct Investing clients,
enables you to identify stocks
that resonate with your personal
interests and lifestyle in
addition to the features of a
traditional stock screener.
Pre-defined stock screens filter
Canadian and U.S. companies
by personal interests such
as Passion for Food, Sport
& Fitness, Travel & Leisure,
Technology & Gadgets, Health
& Home, Fashion, and Music,
Movies & Gaming. It’s a great
way to uncover companies that
you may have never considered
or even heard of before.
If you are a new investor, for
example, lifestyle screeners may
be a great way to get started and
generate ideas. You can browse
through Morningstar’s hand-
picked list of stocks that relate
to your interests and then use
Morningstar analyst research
to help you make an informed
investment decision.
This new feature can be found
on the existing Stock Screener
page under the Quotes &
Research tab of our online
investing site.
RBC Direct Investing Inc.*, RBC Global Asset Management Inc. and Royal Bank of Canada are separate corporate entities which are affiliated. RBC Direct Investing Inc. does not provide investment advice or recommendations regarding the purchase or sale of any securities. Investors are responsible for their own investment decisions. RBC Direct Investing is a business name used by RBC Direct Investing Inc. ® / ™ Trademark(s) of Royal Bank of Canada. RBC and Royal Bank are registered trademarks of Royal Bank of Canada. Used under licence. © Copyright 2012. All rights reserved.
* Member–Canadian Investor Protection Fund.
Information supplied by RBC Global Asset Management Inc. (RBC GAM) has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by RBC GAM, RBC Direct Investing Inc., their affiliates or any other person as to the accuracy, completeness or correctness of information obtained from third parties. Opinions of RBC GAM constitute its judgment as of September 14, 2012, are subject to change without notice and are provided in good faith but without responsibility for any errors or omissions contained herein.∆ RBC Direct Investing was ranked number one by Dalbar Inc. in 2007, 2008, 2009, 2010 and 2011. The annual Dalbar Direct Brokerage Service Award rankings are based on
evaluations made over the calendar year, measuring a company’s quality of performance in product knowledge, professionalism and their ability to provide value-added service.
The information contained herein has been obtained from sources believed to be reliable at the time obtained, but neither RBC Direct Investing Inc. nor its employees, agents or information suppliers can guarantee its accuracy or completeness. This publication is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This publication is furnished on the basis and understanding that neither RBC Direct Investing Inc. nor its employees, agents or information suppliers is to be under any responsibility of liability whatsoever in respect thereof. The inventories of RBC Direct Investing Inc. may from time to time include securities mentioned herein. Using borrowed money to finance the purchase of securities involves greater risk than using cash resources only. If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines.‡ All other trademarks are the property of their respective owner(s).
For more information on our products or services, or to complete an application, drop by any RBC Royal Bank branch or visit our website at www.rbcdirectinvesting.com.
For past issues of our newsletter, go to www.rbcdirectinvesting.com/newsletter. For account-specific inquiries, call us toll-free at 1-800-769-2560. VPS70204 40474 (09/2012)
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of the tools on the online investing site works or entering a
particular kind of order, our Rep-Assist service can help —
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a representative, with your approval, will use innovative
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Many clients have already experienced the benefits of
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tool you would like to become more familiar with or show
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Navigating a Practice Account
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