Hi, it’s Megan here and welcome to the fall season!
We have made a change to the Newsletter format this month. Victor has written the below Portfolio update this month with John providing his closing remarks. We are indeed a team, and we remain committed to our clients in striving to provide excellent service in all areas of investment and wealth management.
With Victor Lu’s strong background in financial planning and accounting, we work with clients to produce a thorough Wealth plan, considering all details. With his CA (Chartered Accountant), CFA (Chartered Financial Analyst), and CFP (Certified Financial Planner) designations, Victor brings a whole expanse of investment knowledge to our unique trading strategy.
John Ridd leads the team working together with both Victor and Megan in investment strategy and portfolio management and in setting direction for both the investment and client service strategies. We especially like that he continues to be committed to the team and our clients for the long term. His energy and work ethic continue to amaze me!
I, Megan, continue to support our clients and the team with all administrative needs – opening new accounts, account updates, client requests (EFTs, special reporting, etc.) and booking and assisting with meeting preparation/follow-up. I also get involved in the trading supporting both John and Victor. I find it exciting to watch our main spreadsheet through the day and monitor how we are doing versus the markets. We believe it is another strength of ours to maintain the depth of a team on the investment side.
We also have a team of professionals that can help our clients with their insurance, estate, and private banking needs. We encourage you to take advantage of these services.
We are confident in our team and our investment strategy as we look to add important value to all our client relationships as they evolve over the years. We look forward to continuing to work with you and always endeavour to provide a great client experience.
Please always feel free to contact me by phone (905)727-5040 (or toll free 1-800-651-5952) or email me at Megan.Lisowski@NBPCD.com anytime if I may be of assistance and/or to set up calls or meetings with the team.
Hi, Victor here. I am pleased to have become involved and well versed in the team’s unique investment strategy. I recognized early on in discussions, with John and Megan, even before officially joining the team, that we as investors and advisors cannot simply support the myths of buy and hold. We need instead to provide our clients with strong proactive and risk managed performance. On that note, I am glad to be writing this month's commentary.
It looks like we are officially into fall, and as the seasons change, so does our investment outlook. We have consistently preached “one foot on the gas and one foot on the brake” throughout the dog days of summer, but as we come out of a rather turbulent September, we are looking to move away (with caution) from some of our defensive positions. Longer term, we have not seen any signs that would cause us to deviate away from the GREEN ZONE.
We spent most of last month playing defence – raising cash and moving towards less volatile positions like gold. Much of the focus was on protecting profits year to date and navigating what is seasonally the worst performing month of the year. While we achieved what we had set out to do and treaded water, we expect that the markets will begin to rally over the next few weeks (as it historically does to end off the calendar year), and we will look to participate in that upside. I mentioned earlier that we will do so with caution and adaptability – there are various factors at play that could cause volatility and impact our strategy over the next few months.
We have spent the better part of the year addressing our thoughts on inflation and its relationship with interest rates. The Bank of Canada reported that the inflation rate cooled to 2% in August, primarily driven by a drop in the prices of gas, telephone services, clothing and footwear. While the news was welcomed relief, it does not reverse the inflation in prices since the end of the pandemic. Nevertheless, the Bank of Canada subsequently dropped interest rates for the third time this year in September.
As we mentioned last month, the Canadian economy has really stalled, and desperately needs interest rates to continue to drop in order to stimulate economic growth. However, we are unable to deviate significantly from our US counterparts without negatively impacting our dollar. The US economy has been much stronger year to date, but in September, the Federal Reserve lowered interest rates (by 0.50%) for the first time in four years. The US has started to see its inflation rate fall faster than expected, and unemployment begin to rise. As the rates begin to come down on both sides of the border, we expect that the stock markets, particularly growth stocks and financials, will begin to react positively as it will ease the pressure on corporate and consumer borrowers.
However, the Fed (surprisingly) followed its decision with hawkish comments earlier last week after strong 3rd quarter economic growth numbers, sending uncertainty back into the financial markets. The port workers strike certainly does not help inflation either.
Longer term, we still expect that interest rates will continue to drop, but it may be slower than initially anticipated, and that calls for caution on our part as we shift from defence to offence.
Whether you follow politics or not, it is becoming increasingly difficult to ignore the noise down south. While everyone’s newsfeed may become inundated with (mis)information and entertaining highlights of the US federal election, we have continually reinforced the notion that the markets will react positively regardless of which side wins. However, given how close the race is, there may be some volatility right up until November.
If the Democrats win, the markets (and investors) will be excited at the notion of a new four year cycle, and if the Republicans win, the markets may jump like they did in 2016 due to the party’s stance on low taxes and low regulations. As of right now, it is anyone’s game, but as long as neither side sweeps the White House, the Senate and the House of Representatives, we anticipate that the markets will react favourably. As such, we will be looking to unwind our defensive positions over the next few weeks into equities ahead of November 5th.
It is unfortunate that geopolitical wars continue to persist in other areas of the world. As of writing today, Russian troops have captured the Ukrainian town of Vuhledar, a stronghold since the war began in 2022. We are now past day 950 of the Russia/Ukraine conflict, and regrettably, there does not seem to be an end in sight. International conflicts always cause some volatility in the financial markets, but as John mentioned in the past, as long as the war stays localized, we do not anticipate significant repercussions from an investing point of view.
It is becoming increasingly difficult to say the same for the war in the Middle East. What started as Israel vs Hamas has now expanded into conflicts with Lebanon and Iran. We are fresh off of Iran’s missile attack on Israel, with Netanyahu vowing retribution. The fear of regional escalation and international involvement will play heavily into the potential volatility of global markets. Therefore, it is important that we tread carefully as we shift our focus towards the seasonal rally because we may need to unwind those positions quickly should circumstances worsen in the Middle East.
Performance year to date has been strong, and part of our mandate is to examine how to best protect that while still participating in upside over the next few months. While we are looking to increase our exposure to equities, particularly in the US, we will do so with prudence and a close eye on the aforementioned risk factors that would cause us to pivot away.
In the meantime, should you have any questions or concerns, please do not hesitate to contact me and the team anytime. We would be happy to have a discussion with you regarding the markets, your portfolios, and your planning needs.
My direct email is Victor.Lu@NBPCD.com
Thank you, Megan and Victor.
We thought it was important you hear from the whole team for a change. Our roles are interchangeable and each of us want you to know and ensure that we are always ready to serve and look to meet the needs and objectives of our clients. Now and we hope you will agree, for a long relationship to come.
As Victor stated, we are in Green Zone, though we have been cautious with owning securities for both the upside and more importantly for protection the last few months. We look forward to moving more proactively into the market for the expected upside to come. Such that we historically and typically see going into the election, the fall rally and into the year end.
Should you have any comments (and we appreciate feedback very much), questions, or concerns regarding the Monthly e:Newsletter, your investment portfolio or financial plans, or if you would like to meet, whether it by phone, video conference or in person, please contact any member of our team anytime. I can be reached by email at John.Ridd@NBPCD.com
Best Regards,
John, Victor & Megan