Market Commentary

Making Cents of the Markets


New episode of Ready.Set.Retire! Listen to our latest clip where Lori and Jon McComb get into the nitty gritty of boring and bad portfolios! Check it out here.

Listen to this week’s Making Cents of the Markets on CKNW where we discussed Canadian banks reporting second quarter earnings and the ins and outs of investing in dividend paying stocks. Listen here.

Be in the Know

Global markets rallied this past week, fueled by strong economic data, declining Covid cases in the US, and a positive update from the US Federal Reserve on how they plan to manage inflation moving forward. US markets continue to lead as they were up approximately 3% while the Canadian market lagged and finished up 1%. Technology remains the strongest area of the market though we saw broad based gains across most sectors as market health continues to improve.

The focus however was on the update from the US Federal Reserve as Chairman Jerome Powell gave a speech where he outlined a new “average inflation target” framework that the Fed will use moving forward. Since inflation has been running below the 2% target for some time, the Fed will now allow inflation to run above target without increasing interest rates as these tightening measures would slow down the recovery. What this means is that the Fed is committed to keeping interest rates lower for longer, even if inflation starts to increase as they want to ensure that the economy recovers fully before increasing interest rates again.

Economically speaking, in Canada we saw that GDP continued to recover in June as it rose 6.5% from the previous month and beat expectations of a 5% increase. Within the US, we saw unemployment claims come in line with expectations as total unemployment remains elevated, but the good news was that personal spending remains strong and durable goods orders are back to pre-Covid levels. Next week we will receive updates on manufacturing and service readings which should provide a good reading of the global economic pulse.

Our Strategy

Portfolios moved in line with our exposures to markets as we saw strong gains in most of our portfolio holdings given that we hold many large-cap market leaders that have benefited from the pandemic. Our strongest holding this week – up 30% – was Salesforce which is the leading customer relationship management software company that reported a record second quarter earnings and was added to the Dow Jones Index.  Another one of our companies, Abbot Labs, had a great week as they announced the FDA approval of their 15-minute Covid test kit which only costs $5. Subsequently the US government announced a deal to buy out the vast majority of these Covid tests for the upcoming year.

We continue to “hi-grade” the portfolios as we made some changes within our mandates in order to sell off some laggards and add to leaders within economically sensitive sectors that we believe will outperform moving forward. As inflation picks up, we believe that technology may take a breather while sectors like materials, industrials, and financials catch up if the economy continues to recover. We remain bullish on equity markets but remain diversified in order to manage downside risk while still participating to the upside.

Chart of the Week

So far, this bull market has been stronger than the rest as the advance off the lows has been the best when compared to all bull markets since World War II. One can see this in the chart below which compares the 1st year of all bull markets for the S&P 500:

Earlier this year no one would have thought that this would have been possible though markets continue to head higher on additional global stimulus and better than expected economic data. While momentum and history is on our side, we remain tactical with a bullish long-term view as we understand the value around active management as markets continue to evolve.

Beyond the Markets

Dine Out Vancouver is back for a new year of appetizing fun – this time with a twist! Dine OutSide has officially begun and is gathering a collection of restaurant patios and Picnic-2-Go offering delicious menus at $15, $25, $35, or $45 price points. There are 161 Vancouver restaurant locations taking part with fan favourites such as Burgoo, Hawksworth, and The Acorn!

For a full list of participating restaurants, click here.

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