Big Picture By Andrew Trimble

Politicians take centre stage There was plenty of political news to keep market watchers occupied this week as important events unfolded in North America, Europe and China. In China, the 19th Communist Party congress got underway mid-week with the country’s President Xi Jinping anointed to a second five-year term. In opening remarks, Xi set a goal to build a modern nation by 2035 and a rich, global power by 2049. The twice-a-decade congress is set to endorse Xi’s political supremacy with the potential to extend his authority past five years putting him on par with some of China’s most powerful, revered leaders such as Deng Xiaoping or Mao Zedong. In North America, NAFTA negotiators have extended talks into 2018 and appear to be moving farther and farther away from a successful outcome. The U.S. is maintaining its hard stance against Canada and Mexico on a range of topics and the basic architecture of an agreement. If the deal ends it will mark an important turning point in continental commerce as NAFTA has guided trade among the three countries for a quarter century. Turning to the U.K., British Prime Minister Theresa May went to Brussels Thursday to meet with EU chiefs to try to re-ignite stalled Brexit talks. The impasse stems from Britain’s reluctance to reveal how much it will pay to leave the Bloc which is a pre-condition set by the EU before tabling future trading agreements. Also in Europe, the potential declaration of independence threatened by the Catalan province in Spain is one step closer to reality despite threats of the central government removing decision-making powers from Catalonia. Turning to economic news, China released Q3 GDP data which showed the world’s second-largest economy grew 6.8% yoy which puts it on target to meet 2017 growth projections. Returning to the U.S., politicians passed a budget blueprint Thursday that represents the first step toward revamping the tax code which bodes well for Trump's tax reform. Finally, corporate America continues to deliver when it comes to earnings as roughly 23% of S&P 500 companies reporting have beat forecasts.

Markets

Stocks grind higher Most North American stock benchmarks continued their ascent this week with U.S. bellwethers notching more record highs and the Dow crossing the milestone 23,000 point level. For the four days covered in this report, the Dow rose 292 pts. to close at 23,163, the S&P 500 added 9 pts. to end at 2,562 and the Nasdaq ended flat at 6,605 pts. In Canada, the TSX ended up 11 pts. to settle at 15,818.

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TM Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management TM consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc (SCI). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

Equities/Strategy Markets continue to impress following U.S. election Strategy: Global markets have continued to grind higher in recent weeks despite volatile headlines thanks largely to supportive medium-term market fundamentals. In particular, economic growth across major economies is hitting 7-year highs while the recovery has broadened out into a global synchronized upturn for the first time since the 2008/09 financial crisis. We expect this to continue into 2018 as well with unemployment rates remaining low and central banks keeping monetary conditions at stimulative levels despite some very modest interest rate hikes. Most of our indicators point to ongoing economic recovery with the earliest start to a recession pointing to 2019 with many indicators suggesting this may not start until 2020. Thus, there remains ample time left in the current equity bull market to view any near-term pullback (5%-10%) in stock markets as an attractive opportunity to put cash to work. We believe investments closely correlated with economic growth trends (cyclical assets) should outperform given our constructive global macro- economic outlook. As a result, we are overweight equities versus bonds with a preference for cyclical sectors (industrials, financials, materials, energy) and Canadian/international exposure over the U.S. for 2017/18. The near-term focus for markets includes third-quarter earnings reports (we expect results to beat modest consensus estimates), the naming of the next Federal Reserve Chair, a possible breakthrough or breakdown in NAFTA renegotiation talks, the European Central Bank’s expected announcement (Oct. 26th) to moderate monetary stimulus, and ongoing headline risks around possible U.S. tax cuts, North Korean missile tests and U.S.-Iran tensions

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Please be advised that this material is not to be distributed to residents of the European Union

TM Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management TM consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc (SCI). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

This material does not include or constitute an investment recommendation, and is not intended to take into account the particular investment objectives, financial conditions, or needs of individual clients. Before acting on this material, you should consider whether it is suitable for your particular circumstances and talk to your investment advisor.

This publication has been prepared by ScotiaMcLeod, a division of Scotia Capital Inc. (SCI). This publication is intended as a general source of information and should not be considered as personal investment or tax advice. We are not tax advisors and we recommend that individuals consult with their professional tax advisor before taking any action based upon the information found in this publication. Opinions, estimates, and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein 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. Neither SCI nor its affiliates accepts liability whatsoever for any loss arising from any use of this publication or its contents. This publication is not, and is not to be construed as, an offer to sell or solicitation of an offer to buy any securities and/or commodity futures contracts. SCI, its affiliates and/or their respective officers, directors, or employees may from time to time acquire, hold, or sell securities and/or commodities and/or commodity futures contracts mentioned herein as principal or agent. SCI and/or its affiliates may have acted as financial advisor and/or underwriter for certain of the corporations mentioned herein and may have received and may receive remuneration for same. All insurance products are sold through Scotia Wealth Insurance Services Inc., the insurance subsidiary of Scotia Capital Inc., a member of the Scotiabank Group. When discussing life insurance products, ScotiaMcLeod advisors are acting as Insurance Advisors (Financial Security Advisors in Quebec) representing Scotia Wealth Insurance Services Inc. This publication and all the information, opinions, and conclusions contained in it are protected by copyright. This report may not be reproduced in whole or in part, or referred to in any manner whatsoever, nor may the information, opinions, and conclusions contained in it be referred to without in each case the prior express consent of SCI.

Please be advised that this material is not to be distributed to residents of the European Union

TM Trademark of The Bank of Nova Scotia, used under licence. Scotia Wealth Management TM consists of a range of financial services provided by The Bank of Nova Scotia (Scotiabank®); The Bank of Nova Scotia Trust Company (Scotiatrust®); Private Investment Counsel, a service of 1832 Asset Management L.P.; 1832 Asset Management U.S. Inc.; Scotia Wealth Insurance Services Inc.; and ScotiaMcLeod®, a division of Scotia Capital Inc (SCI). Wealth advisory and brokerage services are provided by ScotiaMcLeod, a division of SCI. SCI is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.