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The Month In Our Words


Hi,
 
Trust this note finds you well – hard to believe we are in the middle of August!
 
Your portfolio made gains again in July. You remain with positive performance over the last twelve months.
 
On the economic front, things continue to unfold according to plan.
 
Employment numbers are improving, with the United States (U.S.) adding nearly one million jobs in July. Their unemployment rate is declining towards 5%.
 
The conversation has shifted from reopening the broader economy to staying open.
 
Positive trends around a world that is more local / domestic and less international remain in place.
 
From here, the plan is unchanged.
 
Continue to stimulate the economy via low interest rates and government investment / spending. This combined stimulus will remain until well after a full recovery in jobs to ensure it endures.
 
A cycle of economic growth continuing for years is a great opportunity for domestically oriented businesses to continue to grow their earnings at double digit rates.
 
This is exactly what occurred again this quarter and in the guidance provided by corporate North America for the year ahead.
 
Large companies have probably never been in as strong of a financial and fundamental position as they are today.
 
Record levels of cash on their balance sheets and historically low interest rates on their long term debt translate into share buybacks, dividend increases and takeovers to drive growth in the months ahead. All good things for us as investors.
 
We own a properly diversified and high quality collection of investments to participate in growth while being protected from the inevitable bumps along the way.
 
You remain in a strong position financially.
 
The view from Brian Belski, BMO’s Chief Investment Strategist:
 
“The S&P 500 posted its sixth -straight monthly gain in July … despite some price choppiness and bouts of volatility during the month. Delta variant concerns and lack of a substantial pullback this year seemed to be two key factors contributing to the growing anticipation of a market correction that has developed among many investors in recent weeks , and the subsequent pivot into defensive groups ... From our lens, while we are not ruling out the possibility of a pullback in 2H, we do not foresee any type of prolonged market decline given the positive fundamentals currently in place for US stocks. Indeed, S&P 500 Q2 EPS [earnings per share] growth is on track for its best period since 2009 with EPS and sales beats sitting at record levels, while 78% of FY1 and FY2 EPS revisions over the past two months have still been positive, according to our revisions composite. As such, the path of least resistance remains higher, in our view ... That being said, we continue to recommend that investors stay active and focus on individual stock opportunities rather than passively investing in entire sectors or the overall market… Canadian equities posted another monthly gain in July , marking the sixth consecutive monthly gain for the S&P/TSX. However … July was the slowest monthly gain over the previous six months and the breadth of performance was decidedly more mixed. This moderation is very consistent with our view for the second half of 2021 as the market normalizes from extreme levels. On a fundamental basis , the slower price performance helped push valuations lower for the second consecutive month as earnings growth continued to outpace the market. Furthermore, the breadth of positive revisions remained well above historical averages, suggesting continued earnings momentum even as price momentum fades. Overall, we continue to believe price momentum is likely to slow in the second half as the market transitions to a more earnings -driven market that will continue to see normalization in valuations , and ultimately a return to long -term trend earnings growth.“ Portfolio Strategy – August 2020. BMO Capital Markets.

 
-          Stocks in your portfolio that made a new 52 week high this past month: Accenture*, Bristol-Myers*, Johnson & Johnson*, Microsoft*, Royal Bank*, S&P 500 Index, Telus*, Waste Management*

-          Stocks in your portfolio that made a new 52 week low this past month: None
 
-          The Loonie was unchanged versus the US dollar at $0.805
 
 
We hope you continue to enjoy an excellent summer of 2021.
 
All the best of health and happiness to you and yours.

 
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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