Please see Disclosures and Disclaimers on the last page of this report.

MARKET RESEARCH
PRI VATE CL I ENT RESEARCH
Market Snapshot August 2014





Group Line: 1-416-350-3045
Toll Free: 1-866-694-5479
privateclientresearchhw@scotiabank.com
August 13, 2014
ITS THE EARNINGS, STUPID! SANCHITA THAKER

Welcome to the summer of 2014. The season has certainly offered a lot from a geo-political standpoint; the conflict
between Russia and Ukraine has continued to ebb and flow, the infiltration of Islamic insurgents in Iraq has caused
more havoc in an already beaten-down nation, and the tensions between Israel and Palestine have taken a turn for the
worse, once again. Ugly news headlines have naturally caused some investors to feel jittery about exposing their
portfolios to riskier asset classes. And sure enough, a punchy news headline regarding any of the aforementioned
conflicts has caused markets to move significantly in a single day; however, our question is: how much of an impact do
these geo-political events really have on equity market performance over the long-term? We decided to dig a little
deeper by looking at two significant geo-political events in the last decade and examine their effects on market
performance.
Lets go back to September 11, 2001. On the first day of trading after the attacks, the S&P 500 Index lost 11.6%,
largely because investors anticipated market chaos, panic selling and a disastrous loss of value in the wake of the
attacks. However, just six months after the event, the S&P 500 Index was 9.5% higher than its closing level on
September 10
th
.
Lets take another example and look at what happened during the 2003 U.S.-Iraq war. A week after the U.S. launched
airstrikes on Baghdad in March 2003, the S&P 500 had shed more than 5%, however, only three months after the start
to the war, the S&P 500 Index had recovered its losses and was up close to 12%. Both events were large geo-political
crises. Both events caused incredible uncertainty amongst investors, and both events have gone down in history as
world-changing affairs.
These are just two examples, but history has shown that unless any crisis continuously and exponentially gets out of
control, the markets will eventually recover. Geo-political events may add to market volatility in the short-term, but this
volatility has shown itself to be a buying opportunity in many instances. It is most important to remember, however, that
growth in corporate earnings is the biggest driver of market performance over time.
Therefore, coming back to the issues we face today; yes, on any given day there is still a chance that tension between
Russia and Ukraine or between Israel and Palestine could roil the markets, but it is our view that a prudent investor
should keep their focus on investing over the long-term. If investors can manage to ignore the noise emerging from
geo-political events around the globe, and concentrate on investing in solid companies that are well positioned to grow
their earnings over the longer-term, then market participants are less likely to be fazed by new headlines that are likely
to impact market performance only for a short period of time.



















Private Client Research Market Snapshot August 2014

Page 2
1.4%
-1.4%
-0.2%
-3.8%
3.1%
-2.5%
0.2%
-3.1%
-2.2%
-6% -4% -2% 0% 2% 4% 6%
S&P/TSX Comp.
S&P 500
MSCI EAFE
MSCI Europe
MSCI Emerging
S&P/TSX Sm. Cap
DEX Bond Univ.
Gold
CAD/USD
Source: Bloomberg, All Returns are TR and in Local Currency
MONTHLY OVERVIEW 1 MONTH RETURNS
Global equities delivered mixed returns in July, largely
due to increasing speculation on when the Federal
Reserve will raise interest rates. The S&P/TSX
Composite Index advanced 1.4% while in the U.S., the
last trading day of the month contributed to most of the
1.4% decline for the S&P 500 Index. Emerging Markets
(EM) outperformed developed counterparts last month.
The MSCI EM Index returned 3.1%, as China reported
a slew of economic data that beat economists
expectations. Eurozone equities posted a negative
return due to investor concerns over the financial
health of one of Portugals largest banks coupled with
growing speculation that economic recovery in the
region may be slowing. The MSCI Europe Index fell
3.8% in July.
The risks facing the Canadian economy have
diminished slightly, especially since the U.S., which is
also Canadas leading trading partner, appears to be
on the road to recovery. The Canadian core rate of
inflation carved out of a trough, industrial production has been relatively strong, and while we have seen a modest
increase in the labour force participation rate, the unemployment rate failed to break below the 7% mark. An
unanticipated slowdown in the global economy or the lack of growth in net exports remains the most significant
downside risk to real GDP growth in 2014.
Turning to the U.S., minutes from the Feds latest monetary policy meeting suggested that the central bank continues
to aim for the bond purchase program to end in October, provided that economic recovery remains on track. Economic
data from the U.S. was encouraging; GDP in the second quarter rebounded strongly as the annualized growth rate
came in at 4%, the labour market continued to show signs of strength, with the jobless rate falling to 6.1% in June and
the Conference Boards Index measuring consumer confidence touched the highest level since October 2007 last
month.
Recovery in Europe painted a different picture. While the manufacturing PMI Index showed positive results, the volatile
situation in Ukraine and capital concerns facing the largest Portuguese bank weighed on equities. Inflation continued
to be well below target, falling 0.1% to 0.4% in July and the unemployment rate for the region still holds above 11%.
The ECB kept interest rates on hold, falling in line with economists expectations.







MARKET OUTLOOK
Looking ahead, Scotiabank economists expect the global economy to strengthen in 2014, with the developed nations
leading the way. In Canada, business investment and export growth is yet to fully materialize, however a weaker dollar
coupled with new international trade agreements may make the domestic economy more competitive and in turn,
relieve the pressure on domestic demand to contribute to growth. In the U.S., investor confidence is increasing,
corporate profitability is in good shape, household balance sheets have improved significantly and the labour market is
on the mend all signs that the worlds largest economy may be poised for modest growth. From a monetary policy
perspective, both the Federal Reserve and the Bank of Canada are likely to leave interest rates unchanged until the
second quarter of 2015.






Private Client Research Market Snapshot August 2014

Page 3
Monthly Market Statistics:
Total Return Index Returns (Annualized After One Year)
1M 3M 6M YTD 1YR 3YR 5YR 1M 3M 6M YTD 1YR 3YR 5YR
TSX Composite 1.4% 5.4% 13.5% 14.5% 26.5% 9.0% 10.4% 1.4% 5.4% 13.5% 14.5% 26.5% 9.0% 10.4%
S&P 500 -1.4% 3.0% 9.4% 5.7% 16.9% 16.8% 16.8% 0.7% 2.5% 7.3% 8.3% 23.8% 22.0% 17.0%
MSCI EAFE -0.2% 2.6% 6.9% 3.3% 13.4% 12.2% 9.7% 0.1% 0.2% 5.3% 5.7% 22.4% 13.3% 10.1%
MSCI World -0.8% 3.0% 8.5% 5.0% 15.9% 14.4% 13.3% 0.5% 1.8% 6.7% 7.5% 23.4% 17.5% 13.6%
MSCI Pacific 3.1% 8.8% 8.7% 2.5% 15.5% 15.0% 8.6% 3.9% 7.9% 7.8% 7.7% 20.2% 12.0% 8.9%
MSCI Emerging 3.1% 8.6% 13.0% 8.0% 15.8% 5.8% 8.5% 4.2% 7.9% 13.7% 11.2% 22.5% 5.2% 7.9%
TSX Small Cap -2.5% 2.5% 13.1% 15.0% 27.7% 1.7% 12.6% -2.5% 2.5% 13.1% 15.0% 27.7% 1.7% 12.6%
Global Small Cap -3.3% 1.5% 3.8% 2.3% 14.9% 14.2% 16.5% -2.0% 0.4% 2.1% 4.8% 22.1% 17.3% 16.7%
DEX Bonds 0.6% 2.1% 2.8% 5.5% 5.8% 4.3% 5.2% 0.6% 2.1% 2.8% 5.5% 5.8% 4.3% 5.2%
DEX Bonds: 1- 5 yr 0.2% 0.6% 1.0% 1.9% 3.0% 2.5% 3.1% 0.2% 0.6% 1.0% 1.9% 3.0% 2.5% 3.1%
Canadian Yield Curve Commodities Performance (1M)
10YR Government Bond Yields Bond ETFs (1M)
Source: Bloomberg, iShares.ca
Canadian Dollar Returns
July 2014
Local Currency Returns
-6.8%
-13.9%
-3.1%
-2.8%
1.3%
-16.0%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
0.2% 0.2%
0.3%
0.7%
-0.14%
-0.2%
-0.1%
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
3
M
6
M
1
Y
2
Y
3
Y
4
Y
5
Y
7
Y
1
0
Y
2
0
Y
3
0
Y
31-Jul-14 31-Jul-13
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
J
u
l
-
0
4
J
a
n
-
0
5
J
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-
0
5
J
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6
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6
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7
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7
J
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-
0
8
J
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-
0
8
J
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0
9
J
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9
J
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J
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J
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4
Canada U. S.





























Private Client Research Market Snapshot August 2014

Page 4
Real GDP (%)
Unemployment Rate (%)
Consumer Prices (YoY %)
Housing Prices (YoY %)
**Data for Q2 2014 is unavailaibe Source: Bloomberg
Economic Statistics
6.0
7.0
8.0
9.0
10.0
11.0
12.0
13.0
Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Canada U. S. Euro-Area
0.0
0.5
1.0
1.5
2.0
2.5
Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Canada U. S. Euro-Area
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Q1 13 Q2 13 Q3 13 Q4 13 Q1 14
Canada U. S. Euro-Area
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14
Canada U. S. Euro-Area
Forecast
Forecast
Forecast





























Private Client Research Market Snapshot August 2014

Page 5


Disclosures & Disclaimers
Important Disclosures
This report has been prepared by HollisWealth
TM
(a division of Scotia Capital Inc.).
General Disclosures
HollisWealth prepares this report by aggregating information obtained from various sources as a resource for HollisWealth
clients. Information may be obtained internally within HollisWealth or from the Equity Research and Fixed Income Research
departments of the Global Banking and Markets division of Scotiabank. Information may be also obtained from the Foreign
Exchange Research and Scotia Economics departments within Scotiabank. In addition to information obtained from members
of the Scotiabank group, information may be obtained from various third party sources such as Standard & Poors, Valueline,
Morningstar CPMS, Bank Credit Analyst and Bloomberg. The information and opinions contained in this report have been
compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their
accuracy or completeness.
While the information provided is believed to be accurate and reliable, neither Scotia Capital Inc., which includes HollisWealth,
nor any of its affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of
such information. Neither Scotia Capital Inc. nor its affiliates accepts any liability whatsoever for any direct or consequential
loss arising from any use of this report or its contents.
This report is provided to you for informational purposes only. This report is not intended to provide personal investment
advice and it does not take into account the specific investment objectives, financial situation or particular needs of any
specific person. Investors should seek advice regarding the appropriateness of investing in financial instruments and
implementing investment strategies discussed or recommended in this report and should understand that statements
regarding future prospects may not be realized.
Nothing contained in this report is or should be relied upon as a promise or representation as to the future. The pro forma and
estimated financial information contained in this report, if any, is based on certain assumptions and managements analysis of
information available at the time that this information was prepared, which assumptions and analysis may or may not be
correct. There is no representation, warranty or other assurance that any projections contained in this report will be realized.
Opinions, estimates and projections contained in this report are our own as of the date hereof and are subject to change
without notice.
HollisWealth
TM
is a division of Scotia Capital Inc. and a member of the Canadian Investor Protection Fund and the Investment
Industry Regulatory Organization of Canada.
TM
Trademark of The Bank of Nova Scotia, used under license.