MAR 18 2011 – Dixon Mitchell Commentary on Japan

The following is a commentary from Dixon Mitchell on recent events in Japan:

”As everyone is aware, the earthquake in Japan and subsequent related events have triggered a sharp pullback in equity markets. While the earthquake has been realized as a terrible human tragedy, history shows that such events rarely exert a noticeable market impact when taken in a long term context. Even though the Nikkei fell by 20% following the Kobe earthquake in 1995, it had fully recovered 10 months later, while the market drop after 9-11 was erased in just two months. Though market shocks such as the one we’re experiencing tend to be short lived, they do cause investors to swiftly reassess risk and adjust portfolios accordingly. Over the past six months, market indices have raced ahead, buoyed by a sense that western economies are beginning to mend and emboldened by the exceptionally accommodative monetary stance taken by the US Federal Reserve. As confidence grew, so too did investor appetite for risk, with commodity oriented and economically sensitive sectors leading indices higher. In recent days, these same groups have borne the brunt of the selloff as capital has flowed toward liquidity and safety. This rationalization is reflected in the recent performance of the DM Canadian Equity Portfolio which, as of yesterday’s close, was still up 3.6% since the beginning of 2011. Over the same period, the S&P/TSX has returned 1.2%, with earlier gains eroded by recent losses.

We’ll discuss market events further in our April commentary, but wanted to offer an interim comment to those concerned about current conditions.

Don Stuart

Dixon Mitchell”

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