Market Commentary - Oct. 8, 1998

Dear Investor:

The increased volatility of the financial markets has raised concerns among some investors recently.

While it's easy to be caught up in the headlines, which have been dominating the media in recent weeks, experience has taught us that market movements - both up and down - are normal in a broadly advancing market.

When we established your investment plan, it was based on your specific objectives and goals. Experience has shown us that the best way to handle market downturns is not to deviate from your investment plan and to still pursue good investment opportunities.

History has shown us many examples of downward moving markets that correct themselves within a year. One relevant example is in 1962 when stocks suddenly declined by about 25% for a brief period. There was no recession or declining profit, but there was a major retrenchment in valuations, somewhat similar to today's market environment where costs are edging higher, and pricing power is minimal. This squeezes corporate profits at a time when valuation has been high. A medium-term recovery recouped the damage of these falling stock prices and 1963 saw a new record high for stocks - advancing 43% above the 1962 bear market low.

At this point, we do not foresee a recession this year or next. Moreover, interest rates are unlikely to rise much and could well decline next year. Importantly, bond yields could ease to new lows, which would be very supportive of a resumed stock market advance.

Given the effects of the Asian fallout on the North American markets, we still believe the best course for us is to select quality investments and to try not to time the market. Again, in our experience, the best strategy is to stay the course with your plan and objectives.

Should you wish to discuss the current market situation further, please feel free to call the Managed Money Reporter Service Centre at (416) 863-7777 or 1-800-387-9273.


John Zufelt Carl Spiess
Director Associate Director


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