From the Desk of Irwin Michael – February 12, 2016 Some Thoughts on a Market Recovery The present stock market negativity, extensive media attention on share price declines, fears of a pending economic recession and expanding investor pessimism are all adding to a growing crescendo of anxiety. There is greater focus on the financial negatives and less on the positives of numerous companies’ improving fundamentals, dividend increases and share buybacks. The fact is: The U.S. economy is still growing, albeit, slowly but surely, U.S. wages are increasing and the American unemployment rate in January dipped to a 4.9% low. The question is: are investors too negative and reactive? I believe so. My opinion is that the glass is half full rather than half empty. Consequently, I would like to offer some thoughts on a market recovery given the current excessive pessimistic market psychology. Interestingly, it is worth reminding ourselves that the date, March 9, 2009, was the approximate stock market nadir – of maximum investor despair – filled with widespread pessimistic pronouncements by credible investment professionals. The DJIA reached a market low of 6,443.27 on March 6, 2009 and then reversed course, rising more than 20% to over 7920 within a month. Furthermore, from its March low, the S+P 500 rose over 40% within several months and over 60% by the end of 2009. In a Forbes March 8, 2010 article, David K. Randall reported: “How low can stocks go? That was the ominous query topping The Wall Street Journal’s Money and Investing section on March 9, 2009. It wasn’t an idle question. The Dow was on its fourth straight week of losses, while the broader S+P 500 was below 700 for the first time in 13 years. Goldman Sachs put out a research report that warned the S+P could fall as low as 400. A year later we know that March 9 was the bottom of a months-long financial panic that wiped away trillions of dollars in assets. But on what now appears to have been the best buying opportunity of a generation, many only wondered how much lower the market would tumble.” My point is that the current negative psychology is all-pervasive and is characteristic of a market bottom. While this view is not to imply that the market cannot go lower, my sense is that we are close to a market bottom – similar to the financial circumstances that existed seven years ago. The question many may ask is: what could the catalyst be to turn the stock market upward. The answer is that it could be anything – an innocuous economic, monetary or financial announcement, more quantitative easing or an interest rate comment. The fact is that with many investors speculating on further stock market weakness, most of their negativity, I believe, is already baked into stock prices. Finally, with regard to our present ABC portfolios we remain confident that our holdings are sound, liquid and good-valued. We have strong conviction that they will outperform with the expected market recovery. Irwin A. Michael, President I.A. Michael Investment Counsel Ltd.