March 2019 Portfolio Management Team Update

Elvis Picardo

March 7, 2019

Market & Economic Environment: Global equities added to the January surge that was their best showing in three decades, leading to double-digit gains for many major indices within the first two months of the year. The TSX and S&P 500 rose 3% in February – bringing their YTD gains to 11.7% and 11.1% respectively – while the Nasdaq Composite was up 3.4% and the Dow Jones Industrial Average advanced 3.7%. The TSX and S&P 500 registered broad-based gains, with the Materials sector the only decliner of the 11 groups on the TSX, while all 11 groups for the S&P 500 posted gains. The TSX advance was led by the Information Technology (+8.4%), Real Estate (4.4%) and Energy (+4.4%) sectors, as the latter benefited from a continued uptrend in crude oil that brought its YTD gain to 26%. In overseas markets, European bourses advanced while China was the best performer in February as the Shanghai Composite surged over 13%. (Data Source: FactSet)

Our Strategy: With the TSX Composite trading above 16,000 and the S&P 500 approaching the 2,800 level that has capped its advance in recent months, the Portfolio Management Team (PMT) rebalanced client portfolios in the last week of February, booking some gains in its best performers and allocating the proceeds to securities that have lagged the rally. The PMT remains cautious about the massive equity rebound from the December lows as recent economic data has been on the softer side globally. While weaker numbers may result in major central banks like the Federal Reserve and the European Central Bank continuing to stay on the sidelines in terms of interest rate hikes, economic weakness and surging stock markets seldom go together. In Canada, the TSX is only about 3% away from its record high reached in mid-2018, even as political uncertainty surges and the economy stumbles through a rough patch. The Canadian economy grew by just 0.1% in Q4 of 2018, reinforcing expectations that the Bank of Canada may also be on hold for a prolonged period. With the global equity bull market set to complete a full decade this month, the PMT expects to make tactical and strategic adjustments to client portfolios in the months ahead, in order to take advantage of trading opportunities while protecting capital.

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