Winter 2020 Investment Strategy Update

Mar 26, 2021 | Lauralee Bushan-Jazey


“There are two times in a man’s life when he should not speculate: when he can’t afford it, and when he can.” – Mark Twain


After a great 2019 in the equity markets, it is a good time to take a step back and assess the equity markets’ current state. But first, we would like to wish everyone a Happy New Year and all the best for 2020.


Strategy Update Highlights

1) After 2019’s market performance and current elevated market valuations, we are becoming decidedly more defensive.

2) We expect more Canadian and US interest rate cuts in the medium term, but not in the short term.

3) We are overdue for a market correction.


Fixed Income:


Now that the US/China trade war has abated for the time being, there is slightly more stability in the bond market. Global central banks continue to accommodate with their interest rate policies.

We expect the Bank of Canada to put rate cuts on hold for this quarter but in the medium term, rates are trending downward. The same goes for the US. Should there be a major market pullback we would expect longer-term US Treasury yields to drop.

We are looking to add a money market ETF that will be taxed as capital gains. This means in taxable accounts, you will pay half the amount of tax you’d pay on interest-bearing money market.

The fixed-income portfolio is conservatively positioned with minimal preferred share exposure, no direct high-yield debt or senior loans holdings. Over the next quarter, we anticipate the fixed income portfolio will keep the current focus. With Brexit moving forward, there will be more European economic and political uncertainty. European central bankers will likely continue providing economic stimulus.



By all accounts, 2019 was a great year in the equity markets and offered relief after 2018’s lacklustre performance.

We are taking a more cautious approach currently for several reasons. After 2019’s rally, several indicators show the market’s stretched valuations. That said, markets can continue rallying long after valuations are overextended. Like a pendulum, they tend to overcorrect in both directions, rarely resting in the middle.

With that in mind, we took profits and reducing many US and Canadian equity holdings down to targeted weights. Those profits have not been reinvested and will be directed to fixed-income investments and potentially gold. We have expanded our put protection (it acts like portfolio insurance) to about 50% for the Canadian Equity holdings until this March. For US$ accounts with US Equity holdings, it approaches 60% protection. This partial protection starts after 10% market drop.

The US Equity (US$ accounts) and Canadian equity portfolios generally have 15 to 25 stocks each. The Canadian portfolio has about 20 stocks, and the US$ accounts with US Equities have about 19 Stocks. Each portfolio is approximately 20% underweight our long-term target.

Please remember, it is always hard to sell and raise cash as markets keep going up. It is even harder to deploy that cash back into equities (and some fixed income) as the markets correct. As events unfold over the next several months, we have the flexibility and dexterity to act as needed.



While we are pleased with 2019 returns, let’s remind ourselves of the expression to “never look a gift horse in the mouth”, especially when the bull market is getting long in the tooth. As markets continue to brush off items like conflict in the Middle East, impeachment hearings, and the Wuhan coronavirus, we will remain prudent – rebalancing, keeping put options in place, and holding extra cash. In other words, as always, we are sticking to our process.

Here are some reminders as we enter the early months of 2020:

-2020 TFSA contributions ($6,000) can be made any time, if you haven’t done so already.

-2019 RRSP contributions can be made up to the March 2 deadline.

-2019 tax season is approaching – if you need assistance with your tax documentation, please reach out to anyone on our team. As a reminder, T3’s may arrive as late as the third or fourth week of March.

As always, we appreciate your continued trust and look forward to speaking with everyone throughout the year!