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(June 26, 2008) The economy has still not recovered from slow-growth and troubles in the credit market, and another threat has arisen — inflation. The combination of all these negative factors has Desjardins Group economists suggesting Canada could be headed for a recession.

After four straight months of pullbacks, the Canadian economy is at risk, vulnerable to an official recession, Desjardin says. Desjardins is predicting a meagre 1% growth this year and moderate strength in 2009.

With a high dollar, stagnant American economy and stronger international competition, Canada’s foreign trade is vulnerable, and Desjardins says Ontario is already in a recession.

Inflation is also taking a huge bite out of growth. The impact of oil prices, especially in the United States, where the rise in gas prices has been so substantial that a large portion of the tax rebates issued under the economic stimulus plan could be spent at the pumps.

Desjardins forecasts real U.S. GDP growth for 2008 is 1.2%, but the outlook has been lowered from 1.9 % to 1.3% for next year. According to Desjardins’ economists, it will take longer for the housing market to get back to equilibrium, while consumer confidence, now at a historic low, will remain fragile.

Given the fear of seeing inflation become entrenched in the economy, Desjardins says central banks will avoid cutting rates.

Desjardins expects oil to fall back below a $100 U.S. a barrel though, and predicts a gradual return toward crude prices that are founded on the theory of supply and demand.

“We anticipate that the S&P/TSX will end 2008 with an increase of about 5%. We can therefore expect the index to fall by year’s end on the forecast drop in prices for oil and raw materials. In 2009, it should gain 6%, and we could see substantial volatility,” says François Dupuis, Desjardins Group’s chief economist.

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CMDF halts sales, redemptions

(June 26, 2008) The Canadian Medical Discoveries Fund Inc. has temporarily halted redemptions and subscriptions of the fund.

“This suspension will enable the fund to support its existing venture investments at a challenging time for the biotech industry, and to complete the work required to pursue liquidity and improved valuations,” said Steve Hawkins, CEO of CMDF. “While it’s not a step we take lightly, we see it as the best route to the best returns for all CMDF shareholders.”

Many of the companies that the venture fund has invested in are in the middle of clinical trials, and Hawkins says the fund is grossly undervalued because the firms have yet to bring their products to market. The completion of these trials “should result in higher values for these companies,” he says.

Despite freezing its sales and redemptions, the fund will continue to calculate its daily net asset value.

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Standard Life offers keys to the VIP

(June 26, 2008) Standard Life has launched an online retirement planning and management tool which allows group savings and retirement plan members access to an overview of their planning activities, their contributions, account balances, asset allocations and projected retirement assets.

According to Standard Life, capital accumulation plan members tend to neglect their retirement planning, underestimate how much they will need at retirement and do not understand the planning process. Standard Life’s new VIP Room aims to change that.

“We have leveraged Standard Life’s expertise in group savings and retirement that we have developed over the years and used the latest technology to meet needs that our clients and benefit consultants have expressed,” said Anthony Cardone, senior vice-president, group savings and retirement of Standard Life. “We have created a whole new way for members to manage their retirement assets. And this is only the beginning.”

There is also a separate VIP Room for plan sponsors, designed to streamline administration.

(06/26/08)