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Market Update – January 31st, 2012

If you are not aware, 2012 has had the best January start since 1997.

It is an election year and I am hopeful the gridlock in U.S Congress will subside – maybe even turn their focus on fixing their housing market and unemployment rate! In addition, if we can see positive results coming out of Europe, whereby they demonstrate a concrete plan on how to fix their debt crisis, this too can propel the markets further. As an aside, late last year the European Central Bank (ECB) injected $600 billion into the European banks. This was well received which led to successful bond auctions by both Spain and Italy earlier this month. In short, this demonstrates the market’s confidence in both those economies shoring up their debts. 2011 was a year where “fundamentals” were put to the side and “headlines” drove market sentiment. This has never happened before! In 2011, the market closed up/down by 100+ points 42% of the time. This too has never happened! Last year was an anomaly and I am hopeful the markets begin to refocus their attention on fundamentals – what the companies we invest in actually earn! For example, TD Bank reported profits in every quarter of fiscal 2011, they gained more market share in the U.S, they raised their dividend, and their capital reserves increased, yet the stock was down last year…there is a disconnect! I am hoping this disconnect adjusts itself to a normalized market. Only time will tell but I am cautiously optimistic.

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