RBC Wealth Management has published their 2020 edition of the Global Insight Outlook. In this edition, some highlights include more accommodative monetary policy through lower rates. This has led to a run up in equities as investors switched out from fixed income in an effort to find a better rate of return for their assets. Central banks will likely remain cautious for the near term with a bias towards further rate cuts should the macro environment not improve. 

The sentiments echoed in this report mirror our investment thesis, as we have been more defensive in our equity selections, especially when it comes to sector allocation. This is the so-called flight to quality. By retaining and adding to companies with robust balance sheets that have proven track records of navigating both bull and bear markets, we ensure our primary objective, capital preservation.

Trade discussions remain on everyone's mind. The USMCA continues to stall as Congress won't put the bill on the floor and developments with China seems to sway like a seesaw every passing day. China's economy is expected to continue to slow through 2020, as Bloomberg LP forecasts GDP growth to fall below 6%. 

Canadian banks, the backbone of the TSX, are trading slightly below their long term averages, but we feel this justified given a slowing economy and higher provisions for credit losses. Consumer debt continues to be a concern as the debt to income ration sits above 170% and housing affordability in many of Canada's big cities continues to be a hot button issue. Pipeline capacity is strained and our oil is selling far below market price. The railways simply cannot keep up and only provide a temporary relief to a long term issue. The new Liberal minority government will need to consider policy solutions. Given the need for bi-partisan cooperation due to the loss of their majority last month, this presents an opportunity for either meaningful legislation to be passed or political gridlock.  

North American markets are up well north of 20% this year, valuations are becoming stretched and we believe a pause in the markets would be expected. We differ to the age old truth of be fearful when others are greedy and be greedy when others are fearful. Patience is a virtue at the moment and we will look to deploy additional cash on any market weakness. 

If you have any comments or questions, please feel free to reach out to us.