August 27, 2021
Making Cents of the Markets
Listen now to this week’s Making Cents of the Markets on CKNW, where we discussed how the upcoming Canadian Federal Election could affect investors and markets. We also talked about back-to-school, and how to invest in the future of your kids or grandkids using an RESP account.
Click to listen here.
Beyond the Markets
BC’s most iconic amusement park is ready for another season of family fun, thrills, games, attractions, and carnival food! Playland is now open as part of the annual PNE fair from now until September 6th. Enjoy time with family at the 100+-year-old fair and experience everything it has to offer.
Be in the Know
After a minor pullback in the previous week, North American markets rallied powerfully this week, with key commodities such as oil and copper moving higher. Investors were previously concerned about economic data and growth slowing due to the Delta variant, but are now encouraged that this temporary weakness will likely keep central banks from increasing interest rates earlier than expected. This was confirmed Friday as Fed Chairman Jerome Powell from the US Federal Reserve stated that there is still a lot of improvements to be made until the economy can reach its full employment potential, and sees interest hikes in the distance.
Another supporting factor for markets was that House Democrats voted Tuesday to move forward with a $3.5 trillion budget resolution that paves the way for negotiations on a reconciliation bill focused on Democrat priorities such as child care, education, healthcare, and climate change. Given its importance at this time, we expect that the bill will pass by the end of September, although the final figure may be revised lower to get it across the finish line.
Speaking of politics, over the weekend, Trudeau called a Federal Election to take place on Monday, September 20th, after the Liberals’ previous lead has been slipping as of lately. It appears that a minority government will likely form once again with many split on issues such as taxes, fiscal spending, and housing as important topics to be discussed in the debates early in September. Economic data was light this week with the highlight being that US personal incomes rose 1.1% and personal spending increased 0.3% in July as the consumer remains healthy in the US.
Our portfolios had an impressive week as they followed markets with strength coming through in economically sensitive areas such as materials, industrials, and financials.Materials was the best group by far, seen in our investments in copper miners, steel producers, lumber producers, and agriculture companies to benefit from the economic recovery as well as using these areas to hedge against inflation. We added to certain companies within these areas earlier in the week and are pleased to see the relative outperformance as they are poised to do well moving forward.
Real estate investments (or REITs) have also been an area of strength for us. We initially invested in this area due to strong dividends in a low-interest-rate environment, a hedge for inflation, and to benefit from the economic recovery. While we are comfortable holding them for the coming months, we understand the group’s sensitivity to increasing interest rates which is why we only invest in liquid public real estate investments (vs. private mortgage funds). This approach has served our portfolios well as we have avoided large drawdowns during volatile times in the past because we are able to sell quickly. No sector is a winner all the time!
We believe that true active management is the most conservative strategy when investing in equities. It allows us to make changes when needed and get out of sectors as they are falling so that we can protect portfolios. We will continue to monitor markets and make changes when necessary and we are pleased with where the markets seem to be headed – higher!
Visual of the Week
The comments and opinions expressed in this newsletter are solely the work of Pinkowski Wealth Management, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this newsletter, is for general information only, does not constitute legal or tax advice, and the author Pinkowski Wealth Management does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability.
CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA