April 2019 Portfolio Management Team Update

Elvis Picardo

April 4, 2019

Market & Economic Environment: Global equities shrugged off tepid economic data and a U.S. yield curve inversion in March to finish an exceptional first quarter on a positive note. The TSX Composite added 0.6% last month, bringing its Q1 gain to 12.4%, its best quarterly performance since Q2 of 2009 and its best first quarter since 2000. Gains were broad-based for the TSX, with soaring marijuana stocks leading the Health care sector to a 48.9% surge in Q1, followed by Information Technology (+25.2%) and Real Estate (+16.3%). Energy (+14.4%) was the best performer of the three heavyweight groups on the TSX as crude oil rebounded 33% over the quarter, while the Financials and Materials sectors lagged the index, with gains of 9.5% and 8.2% respectively. The S&P 500 rose 1.8% in March for a Q1 gain of 13.1%, its best quarterly performance since Q3 of 2009 and its best first quarter since 1998; the Dow Jones Industrial Average rose 11.2% and the Nasdaq Composite surged 16.5% in Q1. In a quarter where most major indices posted double-digit gains, China’s Shanghai Composite was the standout performer with a gain of 23.9%. (Data Source: FactSet)

Our Strategy: The biggest financial market development of Q1 was the about-turn in monetary policy by major central banks including the Federal Reserve – whose March 20 statement confirmed one of the most remarkable such turnarounds in years – as well as the Bank of Canada and the European Central Bank. This pivot to dovish monetary policy has provided a tailwind to global equities, even as the U.S. yield curve inversion in the second half of March has market participants wary about the rising risk of a U.S. recession in 2020. With the TSX Composite and S&P 500 currently less than 3% away from their all-time highs, the Portfolio Management Team (PMT) continues to tread cautiously with regard to deploying cash balances that have built up from recent client contributions to their registered accounts. In March, the PMT continued with its strategy of booking some gains from its best performers, and also made a change in the U.S. equity sleeve of its larger models. Last month, the global equity bull market completed a full decade – measured from the market lows of March 2009 – and while a well-known adage holds that bull markets do not die of old age, we believe this aging bull may be vulnerable to the occasional pronounced stumble in the months ahead.

Please contact any member of the PMT if you have any questions or concerns regarding your accounts.