October 15, 1995



The current tone in North American investment markets is positive. With the U.S. Consumer Price Index rising just 0.1% in September, the prevailing theory is that economic growth remains moderate and, hence, so does inflation. Those are kind sentiments for both the bond and stock markets. Long term U.S. treasury bonds trade at a 6.3% yield basis, the lowest since February 1994. Long term Canadas trade at an 8% yield. The average S&P 500 stock trades at 17 times earnings and provides a cash dividend yield of 2.4%. The average TSE 300 stock trades at 13.4 times earnings with a cash dividend yield of 2.3%. A case can be made that the Canadian markets presently offer better investor value, particularily when thought in terms of a cheaper currency, all of which may be influenced by political uncertainty. Nevertheless, North American markets are attracting international investments due to an apparent newly found stability. Stock markets continue to exhibit volatility, in particular when confronted with any surprise, but in general moreso because of the continued play on sectors caused by switches in emphasis and by asset allocation.