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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
Map


Hi,
 
Your portfolio experienced material gains in April, bringing you back to even (no gain no loss) for 2020. You remain with positive performance over the last twelve months.
 
Your portfolio experienced material gains in April, bringing you almost back to even (down slightly) for 2020. You remain with positive performance over the last twelve months.
 
Your portfolio experienced material gains in April, bringing you back above even (gains) for 2020. You remain with positive performance over the last twelve months.
 
Looking back, you were well insulated from the sharp declines that began in February while being well positioned to participate in the sharp rebound of April.
 
What a difference a month makes.
 
The conversation has shifted from shutting the economy down to one of re-opening. Polls in the U.S. have 80% of people expecting to return to their same job.
 
At this stage, April’s data around the economic shutdown will continue to be historically negative to reflect an entire month of closures.
 
For indication that the worst is behind North America, it is not about things getting better but rather the rate of deterioration slowing – flattening the economic curve. We are beginning to see signs of this in the weekly unemployment claims – they remain negative but the numbers are shrinking, not growing. More time is needed to define an enduring trend but this is one of the precursors to a return to growth and recovery.
 
When economic growth returns, we expect the trend of the United States (U.S.) outpacing Canada to continue. Canada faces an added drag from the energy sector (which represents over 10% of the economy). Consequently, the zero interest rate environment in Canada will likely last longer than in the U.S.. The trend for the Canadian dollar is flat to lower, not higher, versus the U.S..
 
Following the lows in March, we found the greatest opportunities in bond markets, buying at discounts and putting cash to work. We have not added to stocks yet (nor have we been sellers), deciding to allow those you already own to rebound and maintain an appropriate percentage in your portfolio.
 
We continue to favour U.S. stock and economic exposure over Canadian while maintaining a growing presence in corporate bonds on both sides of the border. In time, our plan is to use the U.S. corporate bonds to buy U.S. stocks.
 
You and your portfolio are in a strong position.
 
The view from Brian Belski, BMO’s Chief Investment Strategist:
 
“After the steep decline in US stocks in March, the S&P 500 rebounded 12.7% in April, which marked the strongest monthly performance for the index since January 1987. With this rally, the S&P 500 has now recovered more than half of its losses sustained since the selloff ensued and currently sits just ~15% off the 2/19 high. Improving COVID- 19 trends, hopes of economic re-openings, monetary and fiscal policy effects, and extreme oversold conditions appeared to be the primary performance tailwinds during the month and helped boost stocks despite the continued slew of negative economic data releases. From our perspective, it is important to remember that the US stock market is a leading indicator and the 34% bear market decline may have very well priced in at least some of the economic fallout we are currently seeing. With that said, we do believe it will be necessary to see some clarity and stability on the COVID-19 and economic front in order for stocks to embark on a prolonged price recovery. As such, we recommend that investors focus on the next 12-18 months instead of trying to time the market and trade on every headline and data point on a daily basis. Looking out at the next 12 months, we continue to believe the S&P 500 index will be above current price levels and well on its way to new all-time highs.… Yes, most Canadian-centric investors scoff at the TSX’s 200 basis point underperformance relative to the S&P 500 in April, but a 10.5% gain should not be dismissed, in our view. After all, at one point the TSX recovered nearly 60% of its correction losses and has mostly kept pace with its neighbour to the south since the March 23, 2020 lows – all this despite massive dislocations in the Energy markets. Indeed, WTI set a record low during the month and declined 28% in April. Yet the Energy sector actually gained 12.7% on month, outperforming the TSX and in line with S&P 500. So where was the weakness in Canada this month? Yes, Financials gained just 0.9% in April, with banks being the worst-performing industry on the month, decline 1.6%.” Portfolio Strategy – May 2020. BMO Capital Markets.

 
  • Stocks in your portfolio that made a new 52 week high this past month: Johnson & Johnson
     
  • 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 $0.72
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.


 


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March 2020
February 2020
January 2020