BMO Nesbitt Burns
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The Month In Our Words
Trust this note finds you well and set for a great weekend.
Your portfolio posted gains in October. It remains with positive performance in 2021 and over the last twelve months.
For North American stock markets – it is like the summer never ended. September’s declines were more than offset by October’s gains. Indices are back to making new all-time highs.
Throughout it all, the trend of positive economic fundamentals remains unchanged.
A new cycle of expansion has taken root in the United States (U.S.).
Companies doing business in North America are reporting earnings growth and are increasing their guidance of what we should expect over the next twelve months.
To accompany these solid operational results, dividends are being raised. To us, this is a reflection of financial strength and confidence in the future of their respective businesses.
As always, there remains a few challenges to navigate. For example: Bottlenecks and disruptions within supply chains. In short, it is not that supply does not exist. Rather, the problem is that supply is in the wrong place. By the spring of 2022, much of this imbalance will be behind us.
Removing the economic stimulus (government support and low interest rates) has just begun. This was always part of the plan and if anything is happening sooner than we could have hoped when looking back over the last 18 months.
Unwinding stimulus marks the beginning of a new trend and is a positive sign of just how far the healing of the economy has progressed.
Our investment strategy is sound and unchanged: Own a properly diversified portfolio of high quality investments aligned with the positive trends.
You remain in a strong position financially.
The view from Brian Belski, BMO’s Chief Investment Strategist:
“US stocks posted their strongest monthly gain since November 2020, more than erasing its September loss, and subsequently recording five new all -time highs in the process. Resiliency has been the key word for the market over the past month, in our view. Despite US stocks largely moving lower through most of September and into early October amid numerous concerns relating to supply chain constraints, inflation, monetary/fiscal policy, and peak growth to name a few, the market managed to climb the wall of worry on its way to the 59th high of 2021 by the end of October. And even with this recent bout of performance strength, we firmly believe there is more upside left for stocks in 2021, especially as we enter the strongest period of the year from a seasonality standpoint… With Q3 earnings season in full swing, quarterly results for S&P 500 companies are once again exceeding expectations, albeit not quite matching the record levels seen in recent periods… Current Q3 estimates are now indicating [year over year earnings per share] growth of 38.4% for the S&P 500, which would mark the third highest growth rate since 2010… We remain bullish on the [earnings] growth outlook for US stocks and believe that corporate earnings will continue to drive the majority of market gains in the months ahead as earnings persist in surpassing expectations, ultimately leaving consensus forecasts too low relative to actuals.... After the more cautious tone set in September, the October rebound did not disappoint with the S&P/TSX gaining... While the surge in Energy stocks played a significant role in this rebound, the gains were broad based as Industrial, Real Estate, Materials, Financials , and Technology all posting solid gains. Fundamentals clearly remain on the mend with third quarter earnings season already seeing many positive earnings surprises and corporate actions. Overall, while the concerns from September remain in place, the fundamental reality for Canadian equities remain broadly positive, according to our work… In our opinion the broad rebound… to new all-time highs has been fundamentally justified. In fact, S&P/TSX earnings have also hit new all -time highs and are well above their pre -pandemic levels… Overall, like the price recovery, the fundamental recovery has been strong and broad, and has consistently outpaced expectations, a trend that is likely to continue into third quarter earnings season, in our opinion . “ Portfolio Strategy – November 2021. BMO Capital Markets.
- Stocks in your portfolio that made a new 52 week high this past month: Accenture*, Canadian National Rail*, Home Depot*, Microsoft*, S&P 500 Index, TD Bank*, United Health* Waste Management*
- Stocks in your portfolio that made a new 52 week low this past month: Bristol-Meyers, Qualcomm
- The Loonie gained two cents versus the U.S. dollar at $0.81
Ian, Gab & Kaitlyn
* This specific security is covered under the research of BMO Capital Markets. For a full list of company specific disclosures keys please visit https://research-ca.bmocapitalmarkets.com/Public/Company_Disclosure_Public.aspx
or ask your BMO Nesbitt Burns Investment Advisor for a copy.
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