May 2025 - Monthly Update

 

Hi ,

 

Hope this note finds you and your family well as the daylight grows longer and the nights warmer.

 

Your portfolio declined in April. It remains with positive performance over the past twelve months.

 

This month we share perspective and context around what were two very distinct chapters of behaviour for investment markets in April.

 

The first chapter was a nearly consistent theme of selling pressure to begin the month. It is worth noting during that time stock markets in the United States (U.S.) also delivered one of their biggest positive days of all time.

 

The second chapter was the mirror opposite and included a series of nine consecutive days of gains in U.S. markets representing the longest streak in over 20 years.

 

Uncertainty is the most common description of the present environment. We would add the unusually high level of volatility present in investment markets as well.

 

To put things in perspective, volatility describes an unusually wide pattern of price fluctuations (during the day and from one day to the next). It does not mean price is only moving one direction through that interval of time. Meaning it is up and down, not up or down.

 

Price reflects what a market will pay for an investment in the present. Over short periods of time (which for an investment horizon begins at twelve months), day-to-day prices fluctuate much more than the true value of a business or investment. When prices generically go down and uncertainty increases, this creates an opportunity for long-term investors like us to purchase mispriced assets where the value of the business is greater than the price in the short-term.

 

Back in April, we began to act on our process of being careful and opportunistic buyers.

 

For context and perspective on this aspect of our investment discipline, it was about two and a half years ago when we last had an opportunity to act on our process of being careful buyers of mispriced assets. Back then, we were careful buyers of bonds and bond-like stocks based on our assessment that the cycle of interest rate increases had ended. It was time to begin positioning ourselves for the next move in that cycle - interest rate cuts. It took four or five months for our process to run its course, and a similar time horizon is likely in place now with the passage of time helping to moderate the level of volatility still present today.

 

Stocks can grow when the economy contracts: Although down markets sometimes coincide with recessions, U.S. stocks produced positive returns during seven of the 13 recessions since 1945. In fact, the S&P 500 Index gained 3.68% on average during recessions.

 

Our investment strategy remains steady and unchanged. You and your wealth are in a strong position.

 

The view from Brian Belski, BMO’s Chief Investment Strategist:

“US stocks fell for the third consecutive month during April … but the index managed to recoup much of the earlier-in-the-month severe losses that followed the “Liberation Day” tariff announcement on April 2. Indeed, the S&P 500 lost over 12% in the days following the tariff announcement which pushed US stocks very close to -20% bear market threshold by the close on April 8. However, after the Administration appeared to soften its initial hardline tariff approach, US stocks quickly recovered with the S&P 500 almost erasing all its tariff-induced losses. While it is still too soon to tell how all this will unfold in the coming months, we continue to believe that current tariff fears are overstated and that the eventual realized impact of their implementation will be far less severe compared to current sentiment. As such, we also continue to believe that the longer-term path of US stocks remains higher, but given the highly uncertain nature of the current predicament, this path is likely to be very bumpy along the way… The S&P/TSX was down … on a price return basis in April, outperforming the S&P 500... Despite a lot of fear at the beginning of April, the TSX is still up year-to-date. Overall, despite all the volatility in the month, Canadian stocks have been handling the trade noise very well. As we have said many times, investors need to remain non-reactive, disciplined and focused on fundamentals. And fundamentals have not changed in our opinion. Canada remains a relative value play with a rebounding growth profile.” 

 

• Stocks in your portfolio that made a new 52 week high this past month: Fortis*, Thomson Reuters*, Waste Management*( Waste Connections*)
• Stocks in your portfolio that made a new 52 week low this past month: Accenture*, CN Rail*,( BCE*, CPKC Rail*, Rogers Communications*), Microsoft*, Qualcomm*, S&P500 Index, United Health
• The Loonie gained three cents versus the U.S. dollar to $0.725

 

Thank you,

Ian, Gab, Kaitlyn, Naina, and Meeral