Good morning!

Well, indeed ---- this is my Monday morning memo, on a Tuesday!

I woke early Monday morning, coffee in hand, to sit and write my morning memo…..turn on my home computer and…….had an overwhelming sense of vulnerability.

The computer would not work! (insert four letter word)

Needless to say, I did manage to get it working by 8:30am but I was reminded, yet again, how much we take for granted when things are going smoothly. I say again, as the pandemic has certainly forced us all to realize how much we enjoyed “normal” and just how vulnerable we feel in the current climate.

The stress that comes from the constant negative news, the financial stress, the social distancing, the challenge of becoming caregiver, distance colleague and home schooling teacher, the worry that we all feel for those we love and their health. It’s a time when this feeling of vulnerability has been real and harsh.

As we cruise into another week, lets remind ourselves that vulnerability is not a weakness or something we can arrange to do without, vulnerability is not a choice, it’s a virtue and actually what makes us who we are, our natural human state. Once we accept this and try to understand our own personal vulnerabilities, we can embrace challenge and find delight in discovery.

“The only choice we have as we mature is how we inhabit our vulnerability, how we become larger and more courageous and more compassionate….” David Whyte

As this relates to the market, seemingly overcoming challenges, the Canadian banks reported results that allowed investors to breathe a collective sigh of relief. Beyond the banks, equity markets rallied further last week and are green again this morning, but it was the inner workings of the move that was particularly noteworthy.

Sentiment with respect to the Canadian banks had been very poor heading into last week. Investors struggled to understand the degree to which the sector would have to prepare, or provision as it is often called in investment terms, for future loan losses. Fortunately, the results reported by the banks were generally fine. To be clear, profits were down substantially. And provisions did increase exponentially with banks setting aside billions of dollars to prepare for bankruptcies and defaults. But the amounts set aside were generally lower than what some investors had expected, which provided some reassurance that perhaps the environment may not yet be as bad as some had feared. This may help explain why the sector was one of the strongest performers last week and into this week. Nevertheless, it is important to remain vigilant ---- I’m still VERY cautious here and still do not feel we need exposure to the banks until after the next quarter. The risk remains that the banks may have to increase their provisions even more than expected in the future should the economic damage be longer lasting.

Overall, our team remains focused on strong companies who fall into what we call “New Leadership” companies, which is why we have been able to see resilience through the storm and why we are confident in your portfolio positioning going forward. We have been extremely opportunistic in this market, which has played out well for us as the pandemic accelerated many of the trends we invest in. Over the last few months we have been, and continue to be very excited about opportunities across the market.

We understand our vulnerabilities and are on our steady course and will continue to sail into the horizon with confidence!!