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February 2021 Portfolio Management Team Update

Home News & Commentary February 2021 Portfolio Management Team Update
Elvis Picardo

Elvis Picardo

Market & Economic Environment

The record-setting rally in global equities came to a temporary halt in the last week of January, as stocks posted their worst weekly performance in three months. Investors were unnerved by surging prices for the most heavily shorted stocks like GameStop, on concern that hedge funds would have to reduce their market exposure by trimming their long positions. Risk appetite was also dampened by the slow rollout of Covid-19 vaccines worldwide as well as the spread of more infectious variants of the virus in some countries.

The TSX was marginally lower at -0.55% in January, as gains by some sectors were not enough to offset declines in groups such as materials, industrials, and financials (see Chart below). Health care was the standout performer, as the pharmaceutical sub-sector soared 46% on optimism for wider legalization of cannabis companies in the U.S. The energy group also gained as crude oil prices advanced for the third month.

The S&P 500 fell 1.1% in the month, while the Dow Jones Industrial Average fell 2.0% and the Nasdaq Composite managed to finish in positive territory with a 1.4% gain. There was significant divergence in the performance of small and large companies, with the Russell 2000 index – a proxy for small-cap companies – gaining 5.0% in January while the large-cap Russell 1000 fell 0.9%.

(Data Source: FactSet)

Our Strategy

The “reflation” trade was fully in evidence last month, as bond yields rose and investors piled into cyclical and small-cap stocks, on expectations for faster economic growth. The rise in U.S. bond yields now has some economists concerned that inflation may pick up from the combination of a strengthening economy and another massive stimulus package.

The Portfolio Management Team (PMT) believes that the outlook for equities remains favourable, with numerous companies having reported solid earnings growth and issuing positive guidance for the rest of 2021. The PMT is also optimistic that pandemic-related news flow will finally turn positive in the weeks ahead, as the vaccine rollout picks up momentum across many nations. Given the upward trend in the markets, the PMT has invested contributions made by clients to their RRSP and TFSA accounts as expeditiously as possible.

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


This information has been prepared by Luft Financial. Opinions expressed in this article are those of Luft Financial only and do not necessarily reflect those of IA Private Wealth. Furthermore, this does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors.

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