“The desire for gold is not for gold. It is for the means of freedom and benefit.” Ralph Waldo Emerson
We are months into the Covid-19 pandemic with Canada faring well in relation to our southern neighbours. We hope that you are healthy and safe. We are always available to help you and are consistently assessing our portfolios to help you navigate the financial impacts of Covid-19 and into the future.
Strategy Update Highlights
- Portfolios are conservatively positioned with exposure to equities, fixed income, alternative investment, a healthy cash position, gold and some portfolio protection.
- Experts maintain that Covid-19 could persist well into 2021. COVID-19 transmission rates continue to impact economies and markets.
- The central bank monetary and government fiscal (spending) intervention and support will continue.
Fixed Income:
Central banks stabilized the banking, money market and fixed-income markets. Their bond purchases steadied credit markets ensuring orderly cash flows to keep business operations running, and to pay wages.
On the fixed-income front, we will be looking at adding more global bond exposure. We are currently assessing our individual preferred share and index exposure to determine where we can add value or decrease risk. With central banks still providing a back stop, it creates a very favourable situation for the bond markets.
In addition to adding bonds, and assessing preferred shares, we are researching current and potential liquid alternative positions to see if they are adding value or could add value by keeping the same returns, but lowering risk.
Equities:
While equity indexes rallied considerably off the March lows, most are still down year to date. With everything going on globally at the moment, we believe prudence is warranted as we wait for Covid-19 to run its course or be remedied with a vaccine.
We increased exposure to some new sectors, while still having elevated cash positions. That said, we were quite active last quarter. For example, we added to areas such as the Utilities Sector (Canadian Utilities), Consumer Staples (Weston, Kroger and topped up Alimentation Couche-Tard) and additionally, the Gold Sector (gold bullion and gold equities). For those with US$ accounts, we added the Pharmaceutical Sector (GILD, BMY, Merck, Elli Lilly), and Software and Technology Sector (Microsoft, Broadridge, Twillo and Netease).
We renewed insurance/put protection to provide a partial safety net on Canadian equity holdings and US$ accounts with approximate equity exposure of $33,000 and up.
Newer clients to our Private Investment Manager (PIM) process may have elevated cash as we transition your portfolios. This allows us the flexibility to buy on dips or as we identify investment opportunities.
We continue focusing on companies exhibiting mainly:
1) Lower average volatility
2) Strong balance sheet
3) Safe, growing dividend
4) Resilient business model
Conclusion:
Because of the prudent actions we took, average portfolio volatility was low. We think portfolios are well positioned to weather this crisis. As we progress through the Covid-19 pandemic, we will continue being very active. While investing is never risk-free, we believe risks are especially elevated at the moment; consequently, we will continue to exercise caution. We are working to mitigate the increased volatility and reduce risk by using cash, short-term government bond exposure and safety net/put protection. We are always looking for good positions to add while assessing our current positions.
We see continued monetary response from global central banks’ monetary actions and global government spending/ fiscal assistance to help navigate through this crisis.
Canada “flattened the curve”, but the US continues to struggle. Please take care to keep our Covid-19 cases in check by following health officials’ guidelines. As always, we appreciate and value your trust. Stay well. Stay safe. And don’t hesitate to stay in touch.