Market Outlook

April 2003 - Markets initially rallied after the commencement of the coalition “Attack on Iraq”. However, this bounce, premised on a repeat of the swift ground phase of the 1991 Gulf War, soon ran out of steam as investors began to perceive that the current conflict would last longer than initially believed. Some state that this war will exacerbate economic stresses while others hold that the resolution of these long-simmering tensions will be positive. As we have no particular insights on this matter, we continue to focus on investment opportunities that can deliver positive revenue and earnings growth and either income or capital appreciation.

The banking sector ought to return to double-digit growth in the second quarter of 2003. Short-term, this sector may display a fair degree of volatility owing to merger speculation and periodic surfacing of credit quality issues. Longer-term, the banking sector ought to benefit from earnings leverage to lower loan loss provisions, improving capital markets and an increasing stream of dividends.

As a source of investment income, investors have become increasingly comfortable with the income trust sector, with attractive yields and the capacity to increase distributions over the next year. The gold sector continues to provide a diversification option in volatile markets. As the mid-cap gold segment has become relatively expensive, a “bar-bell” strategy can be employed.

Source: Dundee Securities Corporation Research Department