Market Commentary
May 12, 2023
Making Cents of the Markets
Listen now to the most recent Making Cents of the Markets on CKNW. Lori and Simi talked about the U.S. inflation data coming in lower than expected, and positive earnings results bringing good news.
As Lori was recently recognized as one of Canada’s Top Women Wealth Advisors, she talked about the growth of females working in the wealth industry and the progression of women in investing over the years. Why is it so important that women are involved in investing and financial planning for their future?
Click here to listen.
Beyond the Markets
SummerSing! 2023
As Mother’s Day is this Sunday, why not treat your mom to an afternoon of musical entertainment. The event will take place at the Chan Centre at 4pm.
Happy Mothers Day to all the Moms!
Click here to purchase your tickets.
Be in the Know
“The most authentic thing about us is our capacity to create, to overcome, to endure, to transform, to love and to be greater than our suffering.” – Ben Okri
The War on Inflation Continues
A week after the Federal Reserve hiked interest rates for the 10th time in a row, U.S. inflation data moderated for the 10th month running. The rate hikes have been working.
The U.S. Consumer Price Index fell to 4.9%, lower than the 5% expected by economists. Core-inflation – which excludes volatile components such as food and energy – dropped to 5.5%, below the previous rate of 5.6%. One of the most stubborn components in the inflation data has been wage inflation. The risk with major wage increases is that it pressures companies to raise prices for their goods and services. Wage inflation fell from a growth rate of 5.7% to 5.2% in the latest reading. This is expected to give FOMC officials reason to believe goods and services costs will continue to moderate.
All around, the latest data gives the FOMC reason to stop hiking rates.
Progress on the Debt-Ceiling Front?
The stock market has taken the threat of a US government shutdown with poise, as it remains an unlikely scenario.
The debt ceiling meeting this week between Joe Biden and Kevin McCarthy produced no deal, except for agreeing to have aides continue talking. A second meeting between the leaders was postponed, suggesting aides are making progress.
”I’ve seen this movie several times over the years,” said Republican Mitch McConnel before the Biden and McCarthy meeting. “I think the important thing to say is there will be no default, will not happen, ever, won’t happen this time.”
Treasury Secretary Janet Yellen once again reminded everyone not to take the risk of default lightly. “That’s something America hasn’t done since 1789. And we shouldn’t start now.”
By the way, investors like Warren Buffett know that doom and gloom is not a profitable long-term strategy, as the magazine covers below remind us.
COVID is Over, Unless You Own an Office Tower
The pandemic is officially over, according to the WHO. Air travel is back to pre-Covid levels, while cruise ships are expected to reach full capacity later this year.
But office vacancies continue to rise in many places. These charts really knocked our socks off.
As far as our team goes, we are in the office every day. I guess we are old fashioned that way.
Our Strategy
Stop, (Prevent the) Drop, and Roll
A lot of work goes into a well-thought-out, structured strategy to identify stocks and trends that will bring the most upside. But what about the downside?
We believe that a downside mitigation strategy is just as important. Knowing when to pick winners is only as good as knowing when it’s time to take profits and incorporating risk management tools to protect capital from further downside potential. The two go hand-in-hand, and within a well-rounded approach to investment management, there shouldn’t be one without the other.
As a part of our risk management strategy, we incorporate different exit strategy mechanisms. One mechanism involves selecting appropriate price levels for each of our stocks, should the market price of the stock in question move below that level, it triggers a signal for us that it’s time to reconsider our investment.
One example of how effective this mechanism could be is our recent sale of Mosaic, a producer of fertilizers. It recently traded lower after the company missed their earnings estimates. We sold the stock anticipating that further weakness may be likely, and it then moved north of 20% lower after we exited the position.
Our strategy of analysis and due diligence aims to select the winners of the bunch, but not all of them will pan out the way we expect. This is just part of managing money and what’s important is what we do when a stock goes wrong.
We prefer to sell on strength after things have gone well, and that’s usually what happens. We recently took some profits on our McDonald’s position at more than a 20% profit, we also sold our shares of the convenience store chain operator, Alimentation Couche-Tard, walking away with about 40% in profit.
We continue to be vigilant of opportunities within quality names that go on sale to provide value to our portfolios and being active at taking profits, allows us to have the dry powder needed to take advantage of these opportunities.
Visual of the Week
PWM’s very own Queen of Tax, Andrea, is finally enjoying a well-deserved break.
Enjoy the sunshine this weekend!
DISCLAIMER: Investing in equities is not guaranteed, values change frequently, and past performance is not necessarily an indicator of future performance. Investors cannot invest directly in an index. Index returns do not reflect any fees, expenses, or sales charges.
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. Investing in equities is not guaranteed, values change frequently, and past performance is not necessarily an indicator of future performance. Investors cannot invest directly in an index. Index returns do not reflect any fees, expenses, or sales charges. 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
