Vacation Week / $20 Trillion / (It Often Doesn’t)

On vacation this week at the cottage. As always, I like to write this newsletter with observations from the week.  Reading “So, Anyway’ by John Cleese. Highly recommend his book, also saw him at Roy Thomson Hall live a few weeks ago.

Positives: US, the engine to global growth, reported Real GDP growth at a 4.1% annual rate in 2Q and is up 2.8% in the last year – what helped was cutting taxes and regulation. Slow growth was caused by size of government – too much spending, too much regulation and excessively high tax rates that held economy back – secular stagnation – Canada, take notice. Not only has Real GDP growth picked up – potential GDP growth has accelerated – as unemployment rate remains steady (B. Wesbury). Trade tensions continue – however de-escalating in Europe. Sector rotation may be occurring in some tech stocks as momentum players move on – rotation can be good for other sectors. US has a $20 Trillion economy – over a 10 year period a 3% GDP growth would create a $10 Trillion of additional economic output compared to a 2% GDP growth rate. Recent savings rate was revised higher in US, bodes well for future growth. Trade with EU cooperative instead of combative – everyone wants to see this tone extended to China (J. Siegel). US ADP numbers come in well above expectations. Fed optimistic statement on strong economy and a strong labour market. Fed expected to sit tight and reiterate plan to hike rates at a gradual pace. Yield curve flattening, not inverted – such an occurrence has taken place one year before each of the last 3 recessions – such evidence requires one to pay attention – although it has been my experience that when everyone know something will happen it often does not (J Way comments).

Negatives: Lots of moving pieces in global markets and earnings reports that show slow growth at high valued companies - trade sharply lower. China and US exchange more trade barbs. Fresh worries out of Europe as Bank of England Governor Mark Carney said chance of the UK dropping out of the EU without a deal is uncomfortably high. CAD despite stronger than expected monthly GDP print earlier this week, Canadian are increasingly worried about the domestic economy outlook – half of all respondents expressed view economic conditions will weaken over next six months. Historically, Aug, Sept are technically weak equity months. 

Investment Wisdom: “As long as people have babies, capital depreciates, technology evolves, and tastes and preferences change, there is a powerful underlying impetus for growth that is almost certain to reveal itself in any reasonably well-managed economy.” – Tim Duy 

PORTFOLIO MANAGEMENT–Week’s Highlights
Stock of the Days: FDX, URI, FTS, MI.un, DWDP
Have a great long weekend. Bruce

MacKay Weekly Investment Report Contents:
Page 1 - How I see It
Pages 2 & 3 - Notes and Quotes
Page 4 - CDN Mkts
Page 5 – Int’l Mkts
Page 6- Funds & ETFs 
Page 7-9 – Favourite Charts
Page 10 – MacKay Group Portfolio Management
Page 11 – Comprehensive Wealth Management
Page 12 – MacKay Group News & Events