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Ian Peebles, CIM
Gabriel Martin, CFA
Kaitlyn Vallée

Address
1 First Canadian Place
38th floor, P.O. Box 150
Toronto, ON
M5X 1H3
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Hi,
 
Trust this note finds you well and enjoying the early start to Summer weather.
 
Your portfolio posted gains again in May. You have experienced positive performance in 2020 and over the last twelve months.
 
Stocks and bonds built on April’s rebound and continued their recovery into May.
 
The stock market rally that was initially concentrated within a few of the largest names expanded materially in mid-month to include wide swaths of the market. We take this as a healthy sign.
 
Looking back to the beginning of the year, a consistent theme emerges: high quality, well run companies did the best on the way down yet were also leaders on the way back up.
 
One of the clearest and most important trends is that all government interest rates will remain effectively at 0% for years to come. Governments in Canada and the United States (U.S.) are borrowing money for ten years while paying less than 1% interest. Low interest rates reduce the cost of doing business in an effort to help the continent, businesses and individuals recover (sooner and more fully).
 
While we are constructive on where we will end up, the short term is likely to remain bumpy. With the economy reopening, virus cases will increase and there will be concerning headlines that follow. Add to that renewed geopolitical tensions and the U.S. presidential election in November; it follows that we remain cautious and careful in the short-term.
 
When we exit the recovery and return to a cycle of growth; it will again be led by corporate America. They came into this in the strongest position, are the most dynamic and innovative and attract the best and brightest to lead.
 
As always, it is about striking the right balance between these two pulls by using our process and discipline. Being properly diversified, owning highest quality investment while avoiding those that have real risk of material downside.
 
Our investment strategy remains sound and you continue in a strong position financially.
 
The view from Brian Belski, BMO’s Chief Investment Strategist:
 
“The S&P 500 continued to rebound in May, posting a 4.1% gain during the month as US stocks appeared to look beyond near-term uncertainties and toward economic re-openings and the prospects of a longer-term recovery. The market is now up almost 40% since its March 23 low and less than 8% off its all-time high. Despite this rally, many investors seem to be convinced that another selloff is on the horizon given the degree and speed of the recent price run-up, based on our client conversations. While we are not ruling out the possibility of a short-term pullback in the coming months, we remain steadfast in our call that 3/23 marked the bottom for US equity prices. And although it is unlikely that stocks will maintain this pace of gains in the months ahead, we do believe the S&P 500 will be at, or near, new highs during this time next year… Yes, Canadian stocks underperformed the US in May, gaining just 2.8% on the month... However, given the underperformance of Financials and continued volatility in Energy so far this year, Canadian stocks could have and mostly should have fared much worse than they have. Indeed, the TSX is still keeping pace since the March 23, 2020, trough, despite this recent underperformance. Overall, the market continued to favour the more cyclical areas over the more yield heavy sectors. In fact, Utilities, Real Estate, Financials and Communication Services all underperformed the broad market this month. Meanwhile, the more cyclical sectors continued to outperform, with Technology and Consumer Discretionary the top two performing sectors in the TSX on the month.” Portfolio Strategy – June 2020. BMO Capital Markets.

 
  • Stocks in your portfolio that made a new 52 week high this past month: Home Depot, United Health*
     
  • Stocks in your portfolio that made a new 52 week low this past month: None
     
  • The Loonie gained one cent versus the US dollar to $0.73

Thank you.

 
We wish you all our best,
 
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.


 


Click below to see our previous monthly updates:

April 2020
March 2020
February 2020
January 2020