August 2022 - Monthly Update
Ian Peebles - Aug 01, 2022
Trust this note finds you and your family well as we move through the summer.
Your investment portfolio posted gains in July. It shows positive performance over the past 12 months.
Stock markets continue to recover from their lows of mid-June. This is being lead by the United States (U.S.). As is typical of summer months, the number of shares traded (volume) is at the lowest levels of the year.
A consensus within markets on the path of U.S. interest rate hikes is coming into focus which we expect progress further in the month ahead.
The domestic U.S. economy is an oasis of consistency and stability against the backdrop of a volatile world. The U.S. job market has been stronger than expected as has household spending and the consumer that powers U.S. growth.
The pressure from inflation is not getting worse. There are more and more signs (from the price of gas at the pump to housing and merchandise on the shelves) that inflation is starting to get better. We expect inflation will continue to improve going forward. This path will likely be lumpy rather than linear.
Over the next five years Canada, the U.S. and Mexico will do more business together than ever before. North America will be more self sufficient and innovative with the ability to manufacture items start to finish. There are many positive and enduring trends that result and are reflected in the investments we own and those we avoid.
Quarterly earnings from the companies we own have been ahead of expectations and guidance has been raised on what we should expect from them in the year ahead. Leading businesses thrive during times of uncertainty – this is what high quality leadership and people deliver.
Our investment strategy of the past decade remains focused on companies with excellent leadership, long track records of profitability and a bias towards the U.S. domestic economy.
Your investment portfolio remains well insulated from the selling pressure of earlier this year while participating in the gains of the last eight weeks.
The view from Brian Belski, BMO’s Chief Investment Strategist:
“US stocks recorded their best monthly performance since November 2020 as the S&P 500 jumped … in July, more than offsetting its June losses. A number of themes seemed to contribute to the rebound including the peak Fed and peak inflation narratives, oversold conditions, and better-than-feared earnings. Despite many investors classifying this bounce as a bear market rally, we believe there could be further gains through year end especially if earnings resilience among S&P 500 companies persists, which we are expecting. Indeed, while investor sentiment heading into the Q2 reporting period was very negative, 75% of S&P 500 stocks have surpassed [earnings per share (EPS)] expectations thus far, y/y growth is tracking 2% higher than projected at the end of June, and 2022 bottom-up EPS has still not been revised significantly lower. Looking ahead, we are more optimistic than most in terms of our market outlook... As such, we would advise investors against overly defensive positioning and instead focus on stock-picking opportunities... The S&P/TSX gained… on a price return basis in July, well behind the solid… return for the S&P 500. Canadian equities were held back by underperformance in the Materials sector, with gold stocks declining over 5% on the month...”
Stocks in your portfolio that made a new 52 week high this past month:
None
Stocks in your portfolio that made a new 52 week low this past month:
Accenture*, Royal Bank*, TD Bank*
The Loonie gained half a cent versus the U.S. dollar to:
$0.78
Thank you and all our best,
Ian, Gab, Kaitlyn & Nataliia