Sprung Investment Management Commentary - 2nd Quarter, 2014

Toronto/ON Canada, July 21, 2014 (Newswire.com) - Geopolitical events continued to make headlines this quarter but did little to quell investors’ enthusiasm as markets continued to advance.  Russia and the Ukraine managed to agree to a temporary ceasefire just as sectarian violence in Iraq exploded driving oil prices higher.  China garnered attention with its hegemonic designs on the South China Sea much to the displeasure of Japan and Vietnam as well as pushing back on any pro-democracy desires in Hong Kong.  In addition, Argentina once again threatens to default on its debt after losing a Supreme Court decision to creditors in the US.

The impact of the events in Iraq and the Ukraine spiked investor enthusiasm for energy stocks in Canada and the US.  The industrial sector in Canada was also strong as the railroad stocks continued their ascent as economic conditions improved.  Materials also posted strong gains as mining stocks in both precious and base metals performed well.  Globally, investors’ confidence generally gained momentum with the exception of Europe where fears of economic stagnation grew.  It was a surprise when the first quarter GDP estimate in the US was revised down to a dismal -2.8% following an initial estimate of  -1.0% as a result of severe weather and curtailed spending.

Our view is that it would be prudent to take some profits in securities that have substantial capital gains.

Michael Sprung, President

As North American markets achieve new highs, we note that it has been a nice ride for equity investors since the depths of the market decline in 2008.  In this context, it is prudent to exercise some degree of caution in this environment, as markets tend not to continuously climb, as economies do not continuously grow.  We do not pretend to know when, or if, there is going to be a correction in the near term.  However, we see some signs that could potentially lead to a pullback.

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