For the first half of the quarter, market participants facilitated a run of risk-on activity. The final month, however, was characterized by a pumping of the brakes on high-flying names. While the majority of markets still performed well, there has undoubtedly been a
continued divergence in equities between growth & value â more on that later.
Recent Articles
Weekly Insights: Value continues its comeback
Perhaps one of the more pressing questions for asset allocators and portfolio managers is whether or not the recent resurgence in value stocks is a true turning point or just a blip in the continued dominance of growth. Itâs rare to see one style dominate for so long like growth has, with such a huge acceleration in the trend in 2020. Was 2020 a blow off top for Growth vs Value? Or has the market truly changed?
Canadian Entrepreneur Report 2020: Highlighting The Ten Spotâs Founder Kristen Gale
What does it mean to #FeelLikeATen? The Ten Spot thinks everyone deserves to feel like a ten all the time. itâs all about confidence. A confident woman can do anything: nail her work projects, be a domestic goddess, and look fabulous doing it.
Have you read Echelon Wealth Partnersâ Canadian Entrepreneur Report 2020? Itâs available here. However, if you are just looking for some quick highlights of each of our interviewed leaders and their companies, these short summaries will give you a weekly dose.
Weekly Insights: Bonds Still Work
The market gyrations of holding 100% equity is simply too great for most and combining some bonds reduced the overall
portfolio volatility. This diversification, of adding various asset classes, is at the heart of modern portfolio theory and how most portfolios have been constructed.
Weekly Insights: This time is different
Those four words are arguably responsible for more loss of capital than any other phrase. While certainly these can be
âdangerousâ words when used to cajole the unsuspecting, markets are in fact always changing. They change because the behaviour of market participants changes. Whether the players are central bankers, active portfolio managers or a group of investors influenced by a crowd-sourcing platform, their actions constantly change and that alters how the markets function.
Canadian Entrepreneur Report 2020: Highlighting Three Farmers’ CEO Natasha Vandenhurk
In honour of International Womenâs Day 2021, we are highlighting our female entrepreneurs for the month of March. First up is Natasha Vandenhurk, CEO of Three Farmers. Three Farmers believes that everyone should have wholesome food to eat, an understanding of where it comes from, and how itâs made. They are real farmers, committed to preserving the land through sustainable growing practices and providing nourishing foods grown on Saskatchewan family farms.
March 2021 Investor Strategy: The Yields They Are A-Risinâ
Februaryâs frothy backdrop was comprised mainly of (1) a successful continuation of COVID-19 vaccination administrations across
the globe; (2) patient and (seemingly) stubborn signalling from the Federal Reserve and other central banks in combination with
newly awoken hopes for additional fiscal stimulus; (3) ever-growing interest in investing from the retail community, as exhibited by
Redditâs r/wallstreetbets user growth to ~9.3mn (+40% m/m); (4) sustained idiosyncratic pockets of speculative mispricings across a
variety of assets/securities, most notably in thematic highflying equities and cryptocurrencies; and (5) a steady rise in global yields,
followed by a last-minute inflection to pre-election highs during the monthâs last week.
Weekly Insights: Valuations â Not As High As You Think
High valuations and rising bond yields are not a friendly environment for investors. And while that likely means correction risk is elevated, bond yields and earnings growth are moving higher for good reason. The economy is recovering and in the longer term that is very good news.
Weekly Insights: Waves of Money
Money that flows into or out of an asset class, sector or individual company matters, sometimes a lot. Consider the fact that apart from initial or secondary public offerings or option-related issuance from a government treasury, the number of shares available for purchase in a given company is relatively stable. We are simplifying things here, but if a group of new investors, perhaps Reddit followers who just received a fresh cheque (or check) from their new President, decide to put some money into âABC Co.â, all else being equal, the share price will rise. It will rise until enough pre-existing or new investors decide that they are willing to sell their shares given the new price. Of course, this works in both directions.
Weekly Insights: Cyclical Yield
Dividend-focused investing is at the core of most Canadian investorsâ portfolios, and for good reason. As bond yields grinded lower for much of the past 40 years, the quest for other sources of cash flow fed a steady stream of investors and capital into dividend-paying equities. And it has been a relatively pleasant ride, as this portion of the market has historically enjoyed good returns and less volatility than the overall TSX (a strong combo). Throw on some preferential tax treatment and we continue to believe dividendpaying equities should remain at the core of most portfolios.
February 2021 Investor Strategy: Little Mania to Start 2021
It appears that we have reached a critical moment in the market cycle. Speculative froth has stretched equity markets beyond what was initially expected, with S&P 500 and TSX forward P/E ratios appearing overextended at 22.1x and 16.6x, respectively. Despite hopes for a less eventful year, we may not be party to that pleasure after all if this month is any indication of what is yet to come.
Weekly Insights: Crying Wolf on Inflation, Again?
Once again we are emerging from a period of economic contraction with monetary policy breaking all previous records of just how accommodative central bankers can be. And once again there is a rising chorus of alarm about potential inflation on the horizon. Similar alarm bells were raised following the 2001-2002 bear market and the 2008 financial crisis. They also chimed in 2011 when commodity prices rose sharply, in 2013 during the taper tantrum and in 2016 shortly after Trump was elected. Each time, however, the inflationary wolf failed to materialize.
Weekly Insights: Investor Lessons From 2020
It is difficult to characterize 2020 other than to use the oft-repeated termâunprecedentedâ. The past year does not fit into any historical âboxâ. The economy has been recovering and adjusting, with a lot of help from monetary and fiscal stimulus. But many millions are still out of work and many industries are struggling to get through to the other side.
December 2020 Investor Strategy: 2021 Outlook â To A Less Eventful Year
At the start of the new decade, markets were fraught with uncertainty: global economic growth looked poised to slow, forecast
corporate earnings expectations were mixed, valuations were at all-time highs, and central bank accommodation had pushed credit
spreads to cycle lows. Add the uncertainty of an upcoming U.S. presidential election, correction risk was elevated with the big
question being what would trigger it. As it turned out, investors wouldnât have to wait long to find out: the COVID-19 pandemic
served as the tail risk that changed everything!
Weekly Insights: Golden Pause
Investing in gold, either gold producers or bullion, has never been easy. Of course we are not counting the âgold bugsâ who believe anytime is a good time to buy gold. Gold investing isnât easy because it changes so much from one period to the next. There are periods that gold is a hedge against inflation, other times a hedge against turmoil, sometimes it takes on a more speculative
ethos, sometimes a hedge against the U.S. dollar or fiat currency devaluation. Perhaps the yellow metal is more chameleon than an indestructible element.
Weekly Insights: Who Will Pick Up The Tab?
COVID-19 has caused a global recession, reducing government receipts while triggering a policy response that is unprecedented in size and scope. There is no question this has blown a huge hole through most countriesâ budget and finances. According to the IMF, the fiscal policy response to COVID-19 has been $5.9 trillion so far (as of October 2020). There has also been $5.8 trillion of liquidity support.
Weekly Insights, The Great Rotation
This year has seen an historic divergence between the economy and the stock market, and also within equity markets themselves. There is no question that the COVID-19 pandemic and the response in fighting it has unfairly impacted many industries while
many others remain unscathed or have even benefitted. This divergence has manifested in the equity markets as well, accelerating some preexisting trends and abruptly changing others. This can be seen in the contrasting performance this year of Growth versus Value stocks. To be frank, Growth has outperformed Value by more so far this year than any year in the past (indices were created in the mid 1970s).
Weekly Insights, 2020 Election: Sweet Gridlock?
At this point it would appear, based on the odds and the views of political âexpertsâ, that Joe Biden will be the winner. The Senate will remain under Republican control and the House will be under Democratic control, albeit less so than before. So here are our thoughts
on the market/economic implications with the HUGE caveat that the outcomes are not final and there are likely a few curve balls ahead.
November 2020 Investor Strategy: Pandemic, Polls, & Positioning
The relationship between politics and finance is closely intertwined. Every four years, we have a major convergence
when Americans head to the polls and investors try to figure out what it means for their portfolios. Canadians have a
vested interest as Canadaâs economy and a large portion of diversified portfolioâs are directly exposed to the U.S.
Weekly Insights: Earnings Dance
The 2020 earnings season, much like so many aspects of 2020, is like no other. Q1 results, released in April, were partially impacted by the pandemic but it was guidance that took the real hit. The majority of companies simply stopped providing forward guidance with the legitimate excuse being ânobody knows how this progressesâ.
Weekly Insights: Recession Like No Other
Clearly those that can spend are spending, on durables and not services given that services spending often requires more interaction with people. The problem is that while a large portion of the economy is doing OK, a big portion is not, leading to what is being deemed a K-shaped recovery. For now, government stimulus is attempting to hold up the lower part of the âKâ until a vaccine is developed, or people feel safe to become more âeconomicallyâ active again. The longer this persists, the greater the risk that the lower part of the âKâ drags down the upper part. If this occurs, the pandemic was just the exogenous shock that pushes us into a more traditional recession.
Weekly Insights: Canada’s Changing Energy Sector
Canadaâs energy sector has gone through a rather painful evolution over the past few years. High oil prices, oh so many years ago, unleashed a long-term global supply response during the past decade including large long-term projects and the acceleration of the U.S. shale revolution.
Weekly Insights: IPO Renaissance
It was hard not to notice the excitement surrounding initial public offerings (IPOs) last week as we saw SNOW in September. In fact, IPOs are having a banner year with businesses rushing to raise capital and provide liquidity for early-stage investors given the ample appetite for speculation and new stocks. The pandemic has changed the world, and investors are looking for the leaders of tomorrow.
Weekly Insights: Fast Markets
For those paying attention to markets this year, most would agree that 2020 has not just been an eventful year but one of record speeds. The February correction that grew into a bear market set all-time record speeds for a correction (-10% decline) and bear market (-20% decline). It took eight days from the market high on February 20 to breach correction territory and only 21 days to reach bear market territory. The market then bottomed on March 23 and started its record speed ascent. All the while it managed to avoid, surprisingly, getting the bends by rising 55% over 142 days. Within that rise, there has been a 6% one-day decline and a 7% decline over 3 days. There have also been many pretty big up days.
Investor Strategy: Vaccines May Hurt The Market
All things come to an end â bull markets, bear markets, economic cycles, even pandemics. And we believe that in the coming months investors should begin to increasingly position themselves for the other side of the current environment. We are not implying things will be back to normal, but they will likely be a lot more normal in six months than they are today. That means there are both opportunities and risks in todayâs market, as what has worked well in the past six months may not do so in the next six.
Weekly Insights: Economic Bounce Continues
One would think that with unemployment around 10%, you would be hard pressed to find positive economic data. This economic cycle â if we can call it a cycle â is so unique that trying to follow a regular road map for recessions is certainly challenged.