Left to Right: Corinne, Sarah, Mark, Peter, Nathalie and Jackson

Gallivan Wealth Management Report: November 2024

A few topics our newsletter touches on this month:

• Spotlight: RSVP for Nov 8^th Ottawa Client Event (OCan Film Fest)
• Our Thoughts: US Presidential Election Looms Large
• By the numbers: October
• Other Things: Disruptors podcast, Global Insight Monthly

October in snaps (clockwise from top left): Peter’s son celebrating his finish at CHEO’s RBC Race for the Kids – the event raised $830K for the hospital this year; Sarah’s dogs dressed up for the holiday; Corinne’s sister’s witchy Halloween decorations;  and Nathalie’s boys doing the traditional counting of their “Trick-or-Treat” haul.

Ottawa Client Event (OCan Film Fest –  this Friday, November 8th): We are sponsoring a fun night at the Bytowne Cinema for the Ottawa Canadian Film Festival (OCAN24) where there will be a screening of Canadian short films (concessions & wine/beer on us). Please RSVP if you plan to join and feel free to invite a guest or two  – link to more details here.

Our Thoughts:  US Presidential Election Looms Large

Global equity markets have drifted lower recently, with North American equity markets retreating from highs. In the U.S., central bank policy easing is expected to continue, but investors have tempered their expectations for how quickly rates will fall amid resilient economic data. This, in addition to shifting election odds, has led to rising bond yields. Below, we provide some quick thoughts on the upcoming elections and discuss some takeaways from the earnings season.

U.S. election is tomorrow, November 5^th. We understand the scrutiny being placed on the presidential candidates and their policies but are mindful of the checks and balances that are built into the U.S. government structure that may constrain the next president from pushing through all of their proposed policies. This was discussed in our firm’s comprehensive report from September.The U.S. equity market’s third-quarter earnings season has now passed the halfway mark. Overall, results have been mixed, with the blended earnings growth rate – combining actual results reported thus far and estimates for upcoming announcements – standing at nearly 3.5%. That is the slowest pace of earnings growth in over a year. Once again, the six largest U.S. stocks, all technology-related, have had an outsized impact. Without these companies, the earnings growth rate for the market would be nearly flat.

Despite contributing most of the earnings growth for yet another quarter, the elevated valuations of the mega cap technology stocks have left investors with lofty expectations for current and future quarterly results. A couple of companies managed to deliver against these expectations and saw stock gains as a result, while others saw their stock prices fall in response to increased scrutiny around rising levels of capital expenditures tied to artificial intelligence.

Meanwhile, company management commentary across sectors has provided some helpful colour on the operating environment. On the consumer front, a range of financial and consumer businesses continued to characterize the consumer as reasonably stable and resilient despite high interest rates. Some companies expressed optimism about potential tailwinds from lower interest rates, though they were cautious in suggesting that any significant relief will take time. With respect to artificial intelligence (AI), many companies acknowledged strong demand for the required infrastructure to power this technology, like data centers, cloud storage, computing power, and chips, but cautioned that generative AI remains in its early days and that major use cases will take time to materialize. Interestingly, while headline inflation continues to moderate, companies continue to highlight challenges with respect to costs.

In recent months, sectors outside of technology – such as utilities, real estate, and financials for example, have contributed more meaningfully to U.S. stock market gains. This has been encouraging to see and it suggests investors may be anticipating a reacceleration in earnings growth for stocks across these sectors in the coming quarters. In fact, earnings growth is projected to be nearly 15% next year, far higher than it has been over the past few years. More importantly, it is expected to be fueled by a range of different sectors. We believe this could mark an important and healthy development, should it occur, as it would suggest a broadening in growth with more companies and industries benefitting, providing a constructive backdrop for investors and their portfolios.

By the numbers (October):  The TSX was up 0.9% while the S&P 500 was down 0.9% in U.S. dollars (up 2.1% in $CAD as the U.S. dollar appreciated 3% in the month - tough on snowbirds!) The Europe, Australia & Far East index (EAFE) was down 2.6%, while the Emerging Markets index was down 1.5%. The Canadian bond market was down 1%.

Interesting Listening/Reading

• Disruptors - A dynamic 30 min RBC podcast co-hosted by John Stackhouse and Trinh Theresa Do about reimagining Canada’s economy in a time of unprecedented change.
  • Biotech Boom: Canada’s Life Sciences Revolution
  • AI in Canada: Leading Innovation, Lagging Adoption
  • To check out our Global Insight Monthly for October find the link here.

Regards,

Mark, Peter, Sarah, Corinne,  Nathalie & Jackson

Gallivan Wealth Management