Increasing rates interest in Canada and the United States

May can be characterized by a general downturn in the markets due to the continued correction in the technology titles. In the U.S., the Dow Jones, S & P 500 and Nasdaq indices were down by 2.85%, 2.47% and 10.24% respectively. The TSE 300 index came out favourably with a monthly 2.06% gain. Abby Joseph Cohen, Chief Strategist for Goldman Sachs, predicts that the S & P 500 index should reach 1575 points by the end of the year and 1625 points by spring 2001. According to Cohen, the Dow Jones index should record 12 600 points by the end of the year.

During May, the increase in interest rates became fact. On May 16, 2000, the Federal Reserve Bank Governing Committee increased its rate by 50 basis points: this represents the highest increase in the past 5 years. The discount rate is now 6.0% and the daily financing rate is 6.5%

In a news release, the Federal Reserve Bank justified this increase as a result of the imbalance between supply and demand. In terms of demand, the economic growth for the first quarter of 2000 was 5.4%, under the analysts' predictions of a 6.0%. A decrease in exports and a 50% decrease in inventories explain this economic slowdown. The domestic demand recorded its highest increase in 17 years and sustained economic growth. All in all, economic growth is strong, slowing down only slightly.

Many pundits believe the 50 basis points increase won't be enough to calm down the American economy. Moreover, they anticipate another increase to be announced at the next meeting to be held June 27 and 28, 2000. This means the American markets will remain bullish.

The Nikkei, the Japanese index, made its first change in 10 years to better represent the new economy. Thirty titles were replaced. Among the new titles added were the electronic groups Casio and TDK, the industrial robot manufacturer Fanuc and the electronic component manufacturer Kyocera.

News

Synergy, a mutual fund company specialized in style management, is now offering a new fund: Synergy Extreme Canadian Equity. Managed by three managers, Andrew McCreath, David Picton and Peter Hodson, the objective is to offer investors a fund that does not relate to the growth, value and momentum styles. The strategy focuses on special situations (IPOs and takeovers) as well as sectorial rotation and thematics (technology and telecommunications).

The mutual fund company AGF has modified the name of 10 of its funds. The prefix 20/20 that was used to name 8 funds was removed in order to standardize its brand name. The name of the two other funds was modified to better reflect the purpose of each fund.

As of May 8, 2000, the AIM Cash Performance Fund merged with the AIM Canadian Money Market Fund. From now on, AIM will not accept any other buying for its liquidity return fund.

AGF now offers 6 new funds: AGF Multi-Manager Class, AGF Japan Class, AGF Global Technology Class, AGF Global Health Sciences Class, AGF Global Financial Services Class, AGF Global Resources Class.