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BMO Nesbitt Burns
16775 Yonge St
Posted on: December 18, 2020
We are excited to announce that Kate Murdoch has been recognized as one of the top three wealth professionals across Canada that are under 40. IIAC - Investment Industry Association of Canada is the only awards association that is nationally recognized and accepted by all financial institutions. Participating in this national award is great encouragement for our team to keep pushing forward and driving the industry to new highs. We have always known Kate to be exceptional at what she does and we are thrilled that she has been recognized by the industry. Please join us in congratulating Kate!
This will be the final Weekly eNewsletter for the year and we look forward to coming to you again in January. On New Year’s Eve, let us all raise a glass and make a toast to the end of what has been a tumultuous year, and hopes for the 2021 year!
Markets continue to climb the wall of worry and have pushed to new highs again this week, though only slightly higher than last week. Investors continue to look past the lock downs being instituted, placing their emphasis on positive vaccine news. December is also typically known to be a positive month due to what is commonly referred to as the Santa Claus rally, due to increased spending by consumers over the holiday. As we move into the new year, we expect these moves higher to lessen. Markets are becoming over bought and the bulls will likely begin taking profits soon. That doesn’t mean the bears (sellers) will take control, but it could mean the markets go more sideways from here.
As the Pfizer vaccine is starting to be rolled out in North America this week, and potentially Moderna’s vaccine a little later, investors appear to be looking over the shadows of near-term lockdowns to the light ahead. Some of the political uncertainties that impacted sentiment last week also appear to be easing. The Electoral College vote earlier this week confirmed Joe Biden as the next President of the United States and any political uncertainty has subsided. U.S. politicians have focused back on spending and the stimulus packages. Meanwhile in Europe, the UK and EU have agreed to extend talks on a new trade deal to replace the arrangements currently set to expire on Dec 31.
With this last full trading week of 2020, many are ready to put 2020 behind them with the two-week holiday slowdown upcoming, where we see significantly less trading volume in the market, but 2021 will bring its own set of new challenges.
Longer term concerns for 2021 and beyond:
Going into 2021, there are huge amounts of debt outstanding – globally. Governments, corporations and individuals have been borrowing vigorously and at historically low rates for the past twelve years. We are seeing some signs of inflation and expect interest rates to rise once the government sees some stability. With interest rates higher it is much more expensive to pay back debt. In addition, we are seeing signs similar to that of 1999, in the lead up to the bubble breaking in 2000. Those signs include technology racing ahead of most of the market, and many approvals for new publically traded companies that do not yet have established records, but are being presented with massive valuations such as DoorDash.com, Snowflake, and Wish. Add to that the rise of private equity investing, which in 1999 ran rampant as institutions looked for alternative investments outside of the typical market.
This is all too familiar, and as we look to the past, it shows us how important it is to have active investment management and a disciplined plan. Fortunately we have a plan, which means you have a plan. We have been effective at getting defensive and out of the market as it breaks down. Our shorter term signal did a great job of protecting us during the pullback earlier this year and should markets break again, event driven, or something more onerous like an economic correction, we are again prepared to move aside and find safety in cash. This is a unique strategy that we have worked hard to develop; it focuses specifically on downside risk and protection of your principal investment. It has proven to work and we continue to have confidence in it moving forward.
When the market restores health, we also have a strategy to get back into the market and to once again participate in growth. During this year, we have spent copious amounts of time analysing this part of our strategy and making adjustments so that we can more effectively enter the market. We continue to use our short-term signal, but moving forward we will also be working with a new indicator, which we call the BOSS, to give us confirmation. We have done extensive reviews and back testing of the signal to review its effectiveness. It has lined up nicely with our existing signals and now gives us increased confidence that our signals will to return to the market in a timelier manner.
It is important to note that there is no strategy that can see into the future, get it right 100% of the time, or perfectly time the market. We believe in the need for active management, a disciplined strategy, and downside protection. We have confidence in our signals and strategy and their ability to do just that. However, we continue to challenge our rules, put our plan under the microscope, and improve our strategy as much as possible.
We are in the Green Zone in all of our indicators. As such we are fully invested and on offense. We are focusing on the U.S and International markets, though we are seeing some market strength continuing in Canada as it attempts to push to prior highs too. We fully expect markets to climb the wall of worry and move higher into the New Year. As we have discussed above, we have longer term concerns and will continue to watch closely as our primary focus remains protecting your wealth.
We wish you all Happy Holidays and a safe, healthy and prosperous 2021!
|~ John, Kate, Megan & Michelle|
The 2021 Outlook
Rates Scenario for December 17, 2020
U.S. Jobless Claims; Housing Starts (Nov) — You're Going In the Wrong Direction
Can I help you? No thanks, just looking
|Canadian CPI: Home is Where Inflation Starts
Vaccine Developments Boosting Commodities
Canadian Existing Home Sales (Nov. 2020) — On the Nice List
Cars Boost U.S. Factory Activity
|Phone: (905) 727-5040 | Fax: (905) 830-9538|
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|Our Mailing address is: #221-16775 Yonge St. Newmarket ON L3Y 8J4|
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