Q2 Market Commentary: Common Sense in an Uncommon Time.

June 26th, 2020

Driving through fog is difficult. It is hard to see the road and even harder to see the destination. In the same sense the path from recession to recovery can be just as hard to make out. As the economy emerges from the unprecedented lockdown, investors continue to look for signs that the recovery is going in the right direction.

Let’s start with the state of consumers. Well, consumers are consuming, signaling that the economy is rebounding. Two weeks ago, we had the release of May U.S. retail sales report that showed a 17.7% increase in spending, versus the month prior – the largest monthly increase on record – offering an encouraging confirmation that consumers appear ready and willing to spend as shutdown measures are rolled back. Stimulus checks as well as enhanced unemployment benefits likely contributed to household spending levels. It is important to remember that consumer spending comprises nearly 60% of GDP in Canada and 70% of U.S. GDP, so the jump in May retail sales suggests to us that the worst of the economic contraction was likely confined to March and April.

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Special Report: Coronavirus and the Stock Market

March 4th, 2020

Considering the week that we just went through, we thought it would be prudent to provide investors with a bit of commentary.

The month of February saw one of the worst corrections since the financial crisis of 2008: The S&P 500 was down 8% in February, 16% off the highs (intraday) and entered March down 9% on the year. The TSX Composite was down 6% in February and is down 5% thus far in 2020.

We always like to stress that we are not traders but rather investors — a distinction we think is key to long term success. We do however track and closely monitor market momentum, valuations and investor sentiment. In the last two weeks we have seen red across the board. ‘Black Swan’ events such as this are by definition, impossible to predict. Likewise, the future impact that the Coronavirus may or may not have on the economy and the market is nearly impossible to forecast.

"Buy, sell or hold?  I think it’s okay to do some buying, because things are cheaper. But there’s no logical argument for spending all your cash, given that we have no idea how negative future events will be. What I would do is figure out how much you’ll want to have invested by the time the bottom is reached – whenever that is – and spend part of it today. Stocks may turn around and head north, and you’ll be glad you bought some. Or they may continue down, in which case you’ll have money left (and hopefully the nerve) to buy more. That’s life for people who accept that they don’t know what the future holds." - Howard Marks

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2020 Market Outlook: Happy New Year, Indeed!

January 3rd, 2020

For all the angst about trade wars, geopolitics and a sputtering and overly indebted global economy, 2019 might just be the best year investors have ever had. What a difference a year makes: In late 2018 we had recession fears growing as the China trade war escalated and a U.S. Federal Reserve continued to hike interest rates despite signs of slowing economic growth and a sharp stock market correction.

Fast forward to the end of 2019, and policymakers have reversed course, with a trio of Fed rate cuts and a generous dose of new asset purchases fueling stock market gains. Meanwhile Trump's China trade war has culminated in a phase-one China trade deal, avoiding tariffs on hundreds of billions of dollars in goods and turning this year's recession threat into next year's economic stimulus.

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2019 Market Outlook: Past, Present and Future

January 3rd, 2019

For the first time in a decade, U.S. equities finished lower in 2018. The S&P saw its biggest annual pullback since the financial crisis. The year got off to a strong start with the second-biggest January rally on record on the back of some spillover from 2017’s synchronized global growth theme, positive sentiment surrounding the recently passed tax overhaul, a strong corporate backdrop, and a fear of missing out (FOMO).

However, some combination of stretched sentiment and positioning, along with heightened sensitivity to higher yields, triggered a spike in volatility and accompanying de-risking led by systematic strategies. This drove the first correction since early 2016, though stocks bounced fairly quickly as the buy-the-dip theme found support from strategist commentary highlighting a disconnect between the market and macro backdrop and the ability of stocks to keep outperforming in a higher yield environment...

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