The BoC held its overnight rate steady at 4.50% this week after hiking at each of its past eight meetings (425 bps cumulatively). This was easily its least anticipated decision in more than a year with the BoC having clearly signaled a pause in January and set a fairly high bar to resume tightening. Six weeks was simply too little time to see “an accumulation of evidence” in favor of a restart, and in any case data over that period was mixed. The BoC noted disappointing Q4 GDP growth but attributed the miss to a significant inventory drawdown. While consumption increased, the statement said restrictive monetary policy is weighing on household spending. The BoC took note of January’s surprisingly strong job gain and still-firm wage growth which is out of line with weak productivity. While the BoC has hit pause on its tightening cycle, other central banks (particularly the Fed and ECB) look set to raise rates further than previously expected. Indeed, the statement noted stronger near-term outlooks for growth and inflation in the US and Europe, as well as upside risks to the commodity price outlook from the reopening of China’s economy and the war in Ukraine. That has contributed to tightening global financial conditions and a stronger US dollar. Although there is still discussion of one more hike by the BoC later this year, this week's policy statement did nothing to endorse that view, and the market reaction has been muted.

Should you have any questions or concerns, please feel free to reach out.

Portfolio Notes

(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral

(~) CrowdStrike Holdings (CRWD-US) shares shad a volatile week but ultimately earnings were terrific. The cybersecurity company reported fourth-quarter revenue swelled 48% year-over-year to $637.4 million, which beat average analyst estimates of $624.92 million. Annual recurring revenue increased 48% on a year-over-year basis to $2.56 billion. CrowdStrike has become the market leader in endpoint security, ensuring that would-be cyberattackers can't exploit vulnerabilities in the computers, tablets, and smartphones that its clients' employees and customers use. Owned in Opportunity Portfolio.

(+) Granite Real Estate Investment Trust (GRT.UN) reported solid Q4 results with a beat and hitting the top end of management’s guidance for the year. SP NOI was up +6% in Q4 on higher straight line rent, lower net interest costs, lower G&A, and higher realized FX gains. GRT renewed 80% of 2023 lease expiries, with average rent increases of 20%. Occupancy rose to an extremely healthy 99.6% with strength seen in the US and Germany, slightly offset by Canada and the Netherlands. We would also highlight that the Magna exposure continues to decline, now sitting at 26% revenue. GRT.UN comes with a strong balance sheet, healthy occupancy, as well as a robust growth plan. Shares yield 3.91%. Owned in Cash Flow Portfolio.

(+) Monster Beverage (MNST-US) clawed its way back to 52-week highs following analyst upgrades. Shares of the energy beverage company sold off after the company missed Q4 earnings and sales estimates last week. MNST also announced a 2-for-1 stock split at the time. However, the stock quickly established a bottom, avenging the post-Q4 report losses by the end of last week. The company commands a respectable portfolio of energy drinks outside its primary Monster banner, including popular brands like NOS and Full Throttle. These brands boast a loyal customer base, evidenced by MNST's market leadership position within the energy drink category in the U.S. For example, during Q4, MNST's sales of energy drinks across all outlets (convenience, grocery, etc.) in the U.S. increased 12.1% yr/yr, while the entire energy drink category grew 13.1%. MNST has proven its resilience despite macroeconomic and competitive pressures. Owned in Opportunity Portfolio.

US Financials

Investors dumped shares of SVB Financial Group and a swath of U.S. banks after the tech-focused lender said it lost nearly $2 billion selling assets following a larger-than-expected decline in deposits. The four biggest U.S. banks lost $52 billion in market value Thursday. Shares of SVB, the parent of Silicon Valley Bank, fell more than 60% after it disclosed the loss and sought to raise $2.25 billion in fresh capital by selling new shares. Contagion concerns spooked the global markets rattling stocks from Tokyo to London. Bank stocks were the hardest hit, but smaller lenders like SVB, which has funded start-ups worldwide, are viewed as being particularly vulnerable — and now face potentially serious threats to their survival. The shudder across the banking industry suggests that what went wrong at SVB is emblematic of a bigger problem. Is it? The short answer is no. SVB’s problems arise from balance sheet peculiarities that most other banks do not share. To the degree that other banks have similar problems, they should be much milder. There is one important addendum, though: in banking, failures of confidence can take on a life of their own. If enough people think SVB-style problems are widespread, bad stuff could happen. We will continue to monitor the situation. Please note we do not own shares SIVB-US. We did increase our position in a US Bank ETF on Thursday.

Weekend Reading

RBC MacroMemo - March 7 – 27, 2023 China’s recovery / Strong economic data / New forecasts / Recession watch / Stuttering inflation / Central banks / Friendshoring RBC

Canadian housing market outlook: The bottom of the downturn is in sight The Canadian housing market correction has yet to run its course but it’s gradually letting up. We think activity will hit bottom sometime this spring. Prices will level out a few months later—provided the Bank of Canada is done raising interest rates. RBC ECONOMICS

Matters Beyond Wealth Podcast Series Hosted by Leanne Kaufman, president and CEO of RBC Royal Trust, Matters Beyond Wealth focuses on estate planning, healthy aging and wealth insights to help Canadians plan for today and their future. MATTERS BEYOND WEALTH

Meetings *are* the work What if the only work that matters in a knowledge economy happens when we are together? MEDIUM

J.P. Morgan Asset Management Guide to Retirement Analyzing the most significant issues impacting retirement. JP MORGAN

Mapped: Asia’s Biggest Sources of Electricity by Country Although clean energy has been picking up pace in Asia, coal currently makes up more than half of the continent’s electricity generation. VISUAL CAPITALIST

How dangerous inflation is for investors. The return of inflation is the most important obstacle Wall Street currently faces. In 1977, Warren Buffett wrote an essay on the subject. INFLATION SWINDLES INVESTORS

Proof Point: Canadian women drove a pandemic shift into higher-paying jobs The shakeup in Canada’s post-pandemic labor market saw nearly 200,000 women stream into jobs involving less in-person contact—and often significantly higher wages. RBC PROOFPOINT