December 2021 - Monthly Update
Ian Peebles - Dec 01, 2021
Trust this note finds you well as we launch into the holiday season and the start of 2022.
Your portfolio posted gains in November. It continues with positive performance over the past 12 months.
Investment markets remain resilient in the face of negative headlines that began to surface in September. This coincided with a period of turbulence and is reflected by wider daily price movements in markets.
If we allow ourselves to look past these trees for the forest, we find a North American economy that is strong and growing. This trend is unchanged.
Corporate North America has never been in a stronger position financially – a position that has only grown during the pandemic.
Over the last two years, many businesses have thrived. They have record levels of earnings, cash in the bank and historically low interest rates (examples of their enviable financial position). This is the platform upon which we will extend the current cycle of growth. It is also the foundation that allows us to economically navigate the inevitable bumps along the way.
The signposts for the future are constructive.
In the United States (U.S.), there are over ten million job openings waiting to be filled. Over time, that will be part of the transition from a cycle of growth fueled by stimulus (as it is today and according to plan) to one fueled by old school economic growth: turning savings into spending and the multiplier effect that has within the economy.
There is a new positive trend that has just begun: the removal of stimulus from the economy. This reflects a recovery that is ahead of schedule.
The end of stimulus (both government and central bank) is the destination and we are off to a solid start in that regard.
In terms of the investments we own, here are some of the takeaways from the recently completed quarter of earnings:
- On an individual basis, the worst of supply chain bottlenecks are behind us. Well run businesses acted to figure it out ahead of their weaker competitors
- Guidance for the next 12 months was raised. There is greater confidence at a corporate level for the future
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 were on track to log another solid gain in November until COVID -19 concerns flared back up with the emergence of the Omicron variant, sending the S&P 500 down… for the month. The heightened possibility of a faster taper timeline and Fed acknowledgement that the risk of persistently higher inflation has increased also contributed to the end - of -month price weakness. From our lens, we do not believe we are in for a repeat of Feb -Mar 2020 or any sort of comparable drawdown. Yes, there is a host of issues facing investors…[h]owever, our work shows that the fundamental underpinnings of US stocks remain healthy. Earnings are still solid with forecasts likely too conservative… profit margins have held steady and actually expanded, in aggregate, in the face of supply chain constraints, companies are cash -flush, and shareholder distributions are accelerating. We advise investors to maintain their investment discipline during the ebbs and flows in the market and use these pockets of volatility as buying opportunities. Looking ahead to 2022, we think investors should be prepared for the second derivative. In other words, expect US stocks to once again post positive gains in 2022, albeit less positive, but positive, nonetheless… While the October rebound extended well into November, re -emerging COVID -19 concerns pushed the TSX into the red for November… Although renewed closures have been constant risk for the market, our work shows the fundamental underpinnings of the equity markets remain strong. Earnings continue to rebound, profitability metrics are approaching previous highs… and companies are flush with cash… Overall, bouts of volatility are not surprising, and we continue to believe price momentum will slow and remain choppy as the market transitions to more earnings driven market. "
Stocks in your portfolio that made a new 52 week high this past month:
Accenture*, Home Depot, Microsoft*, Qualcomm, 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*, MasterCard*, Medtronic
The Loonie declined by three cents versus the U.S. dollar to
$0.78
We wish you and the ones you love a healthy and happy new year.
Ian, Gab & Kaitlyn