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BMO Nesbitt Burns
1 First Canadian Place
38th floor, P.O. Box 150
Toronto, ON
M5X 1H3
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Monthly Update





Hi,
 
Trust our monthly update finds you well and set for an early start to spring.
 
Your investments have made money (Profit. After fees) over the past twelve months. Your portfolio was down in February.
 
Unwinding a few months of gains does not mean the great success of 2019 has changed.
 
February was a severe month for stock markets (they posted losses of 10%).
 
Your portfolio was protected by being properly diversified. As always, this protection extends through our sell discipline.
 
Your portfolio is performing well during this volatility.
 
We continue to act on our established plan to navigate periods such as this – crystalizing profits and protecting capital using our process and sell discipline.
 
The headlines were dominated by the spread of the Corona virus and culminated with the largest weekly loss for stocks in the United States (U.S) since the 2008 credit crisis. One day later (March 2nd) U.S. stocks posted their biggest daily gain since 2009. Away from the headlines, Starbucks reopened nearly all of their stores in China at the end of February to reflect the improving health trends there.
 
It would not surprise us if things remain bumpy through the spring and that the U.S. economy will continue to grow with stock markets grinding higher to reflect this growth.
 
Interest rates in both Canada and the U.S. were cut this week to keep the economy strong.
 
Combined with the U.S. rate cuts of last summer, the stimulative effects of these cuts will have positive influence on the economy into 2021.
 
Our investment strategy remains sound and unchanged: Own a diversified group of high-quality U.S. and Canadian investments that pay dividends or interest. These are companies that are innovating and applying technology to make their businesses better.
 
The reason for owning these business and participating in their growth has not changed day-to-day, week-to-week or month-to-month.
 
You and your portfolio are in a strong position.
 
The view from Brian Belski, BMO’s Chief Investment Strategist:
 
“Coronavirus (COVID-19 virus) fears intensified during the latter part of February sending US stocks tumbling to their biggest weekly decline since October 2008 and worst monthly loss since December 2018. The swiftness of the fall was particularly notable with the S&P 500 index climbing to a record high on 2/19, then descending into correction territory only eight calendar days later. Despite this price weakness and the degree of panic that has come with it, we urge investors to adhere to their investment discipline and refrain from trying to time the market, which has shown over time to be a costly investment strategy. We are maintaining our year-end forecasts and remain confident in our S&P 500 2020 base case price target of 3,400, which implies a ~9% gain from current levels. As we stated numerous times before, we fully expected the path to our target would be bumpy with periods of heightened volatility and uncertainty in between…However, it is during times like these that investors need to maintain a longer-term perspective and stick to their investment process rather than making knee-jerk, binary decisions, in our view… Canada followed its neighbour to the south’s lead, as well as most other global markets in a heavily fear-fueled reaction to continued coronavirus (COVID-19 virus) headlines. However to date, Canada has not mirrored its traditional correction “script.” For instance, corrections, let alone bear markets in Canada are traditionally defined by commodity weakness and/or fundamental deterioration. Furthermore, price corrections in Canada relative to the U.S. typically exhibit more of a slow “drip” than free-flowing selling as in the current correction. As such, we continue to believe the current price weakness is all about fear and not fundamentals. While some would argue that the fundamental impact of COVID-19 virus is inevitable, we believe such conclusions are not only premature, but misguided. Fundamentals are about fact and actualities, not fear and anxiety. Therefore, we are maintaining our forecasts for the Canadian stock market at this time and will adjust accordingly if and when actual facts materialize.” Portfolio Strategy – March 2019. BMO Capital Markets.
 
 
  • Stocks in your portfolio that made a new 52 week high this past month: Accenture*, Fortis*, Home Depot, Johnson & Johnson*, MasterCard*, Microsoft*, S&P 500, Telus*, United Health*, Waste Management*
     
  • Stocks in your portfolio that made a new 52 week low this past month: Cisco, TD Bank*
     
  • The Loonie declined by one cent versus the US dollar to $0.75
 
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.