Equity markets remain in corrective trends with the uptrend in interest rates and the US dollar ongoing headwinds for stocks as each of these markets test their next important technical levels. Our base case remains unchanged, viewing the equity correction into Q4 to be consistent with seasonal weakness, and with weekly momentum indicators (bottom panel) suitably oversold, we are expecting a rebound to develop in the coming weeks. The uptrend in interest rates, however, will need to reverse to support a meaningful low in equities. With both equity and bond markets testing key technical levels, the risk to our optimistic base case is that the trend in interest rates continues higher with a move above 5% by the US 10-year yield likely to see further selling in equity markets. Our expectation is for equity markets to remain volatile through month end into the November FOMC Federal Reserve meeting which should provide some clarity for investors on the path of interest rates.

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

Portfolio Notes

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

(~) Agnico-Eagle (AEM-T) The gold miner reported EPS of $0.36, significantly lower than the consensus EPS of $0.41. We were expecting a weak Q3-F23 due to lower grades at Fosterville and Macassa and some challenges at Detour, where a transformer failure meant a SAG mill could not produce for 25 days. AEM is delivering the best operational performance of the seniors (AEM, GOLD, NEM) in 2023, and for this reason it is our preferred name of the three. Owned in Core Portfolio.

(+) Amazon (AMZN-US) reported a terrific quarter with a beat on revenues and EPS owing to strong growth in retail, cloud computing, and advertising. Growth in the company’s cloud business has slowed in recent quarters as customers cut back on costs but came in-line with street expectations of 12% Y/Y, indicating that the slowdown in cloud demand is decelerating as customers shift from cost optimization to new workload deployment. Advertising revenues grew 26% Y/Y, due to strong sales in its e-commerce business. The retail business grew 6% Y/Y helped by its Prime Day sales event. AMZN continues to make progress on improving its cost efficiencies and has also overhauled its logistics network to speed up delivery times. Guidance for Q4/23 was mixed given the midpoint of sales was -2% vs. consensus, while operating income was 1% ahead of street estimates. AMZN’s stock price is up 43% year-to-date, outperforming the S&P 500. The stock trades at a forward P/E multiple of 37x, a discount to its 5-year historical average of 54x. We would continue to own the stock on improving profitability, upcoming cloud acceleration and AI tailwinds. Owned in Core, US and Opportunity portfolios.

(new) Evolve Enhanced Yield Bond Fund (BOND-T) provides investors with a low-cost fixed income solution that will seek to deliver attractive monthly income and long-term capital appreciation. To enhance yield, as well as mitigate risk and reduce volatility, BOND will initially employ an active covered call option writing program on 50% of the portfolio. Initially the underlying portfolio will consist weightings in the iShares 20+ Year Treasury Bond ETF and the Vanguard Long-Term Treasury Index Fund ETF. There are no underlying management fees in the ETF until April of 2024. The vehicle will be targeting a 10% yield. New position in Cash Flow Portfolio.

(+) Chipotle Mexican Grill (CMG-US) is sizzling after delivering a monster earnings beat on solid top-line growth in Q3. Same-store sales of +5% landed toward the high end of the quick service restaurant chain's previous low to mid-single-digit forecast. CMG remains on track to hit its 255-285 new restaurant target this year. The company also targets 285-315 additional locations in 2024, of which 80% will feature a Chipotlane. Thus far, CMG has proven that consumers are still willing to accept higher menu prices, further reflecting the company's competitive edge. Owned in US Portfolio.

(~) Canadian National Railway (CNR-T) Investors were bracing for another weak print from CNR given headwinds from lower intermodal volumes and the BC port strike, and slightly weak results is what we got. Despite ongoing macro uncertainty, signs of a CNR volume inflection are starting to emerge. The company believes that it has moved past the bottom in terms of volumes, and management is now forecasting sequential improvements across substantially all of the company's business lines. All-in, this may remain a “show-me” story till we get indications of volumes moving higher. Valuation remains slightly below the 5-year average at 18.4x NTM P/E (vs average of 20.4x), and we recommend patience for new money at this time until we get further clarity on volume trajectory. Owned in Core Portfolio.

(+) Canadian Pacific Kansas City (CP-T) Q3 Non-GAAP EPS of C$0.92 beats by C$0.26. Revenue of C$3.34B (+44.6% Y/Y) beats by C$900M. A key part of the CPKC story rests on management's track record of operational excellence. The company has already posted significant improvements across an array of combined-company operating metrics. As CPKC continues to optimize its network, we expect it to generate increased asset utilization and higher efficiencies that will drive margin expansion and create latent capacity and improved service levels that will enable it to better compete for share and command stronger pricing power. In our view, CPKC's longer-term outlook outweighs near-term macro headwinds. Owned in Core Portfolio.

(+) Fortis (FTS-T) reported a mostly in-line Q3, with EPS of $0.84. Just as importantly, management reaffirmed its outlook that was announced at the recent investor day. This included capex and funding plans, where FTS expects to spend $25B over the 2024-2028 period, resulting in an expected rate base growth of 6% CAGR. FTS is our favourite to gain exposure to a pure play utility. Fortis is a St. John's, Newfoundland and Labrador-based international diversified electric utility holding company. Shares yield 4.27%. Owned in Cash Flow Portfolio.

(+) Microsoft (MSFT-US) shares jumped after the Xbox owner posted stronger-than-expected fiscal first-quarter results and showed an uptick in profit due to easing operating expenses. Revenue for the company’s Azure cloud unit also exceeded expectations, jumping 29% during the period. While the macro backdrop could remain an overhang in the near-term, we believe that the results essentially confirm that Azure growth has found a ‘new normal’ and the narrative should only get stronger in CY24 with M365 Copilot going live in November and Activision broadening Microsoft’s opportunity in the gaming market. Owned in Core, Cash Flow, and US Portfolios.

(+) ServiceNow (NOW-US) The software company is riding the momentum of a 27% jump in quarterly subscription sales, to $2.2 billion, and an aggressive push into AI. In May, ServiceNow announced a generative-AI partnership with Nvidia to develop customized large language models for data using Nvidia software, services, and infrastructure. ServiceNow is still getting good orders as it helps digitize entire companies and departments in the government. It is winning some very big contracts. The number of customers paying over $10 million in Q3 increased 60% year over year. New platform called Vancouver is producing security software, too. ServiceNow posted fiscal third-quarter net income of $242 million, or $1.18 a share, compared with net income of $603 million, or $2.95 a share, in the year-ago quarter. Adjusted earnings were $2.95 a share. Revenue soared 25% to $2.7 billion, compared with $2.2 billion a year ago. ServiceNow expects annual subscription sales of between $8.635 billion and $8.64 billion. ServiceNow boasted 83 new transactions worth more than $1 million in net new annual contract value in Q2, up 20% year-over-year. Shares of ServiceNow have gained 40% so far this year. Owned in US and Opportunity Portfolios.

(+) Roper Technologies (ROP-US) reported third quarter FY23 sales growth of 16% year-on-year to $1.563 billion, beating the analyst consensus estimate of $1.548 billion. We were surprised by the market’s flat reaction to Roper’s report as these were great numbers. We think the Roper business model is unique within the sector on a number of key aspects: (1) unwavering focus on asset-light, high free cash flow businesses; (2) recurring revenues account for +60% of its mix thanks to aftermarket and subscription fees; (3) self-funded M&A focused on SaaS and network-based businesses, now two-thirds of earnings; (4) with elements of a publicly traded private equity firm, Roper has a decentralized corporate structure with 27 group presidents; (5) niche, medium-tech portfolio equipment businesses. Best-in-class operating metrics. In our view, Roper is indisputably one of the highest-quality names within the multi-Industry sector. Owned in Core and US Portfolios.

(sold) SmartCentres REIT (SRU.UN-T) RBCCM produces a report that speaks to distribution sustainability within the sector. On a high level, payouts look largely sustainable, but a few REITs that come with below average ability to maintain the distribution included SRU.UN. To be clear, distribution cuts are not imminent, but the margin of error is certainly more limited driven by a combination of weaker fundamentals, higher leverage, and strategic considerations. Sold in Cash Flow Portfolio.

(NEW) Victoria's Secret (VSCO-US) Victoria's Secret has 20% market share with 35% via digital sales. They are very close to reaching $6.3b in Sales with a $650m EBITDA. It has a $1.4b market cap and $2.5b enterprise value today. A few facts about the company which hopefully will be a reminder of those of you that are very familiar with us and maybe just the starter for those that are new to the company. They are the number one lingerie brand in North America, have 25 million customers and of those 18 million are now in their loyalty program. They have 85 million followers on Instagram - which is the second most followed brand in the world. They are a global business with a presence in 65 countries with 1350 stores. New position in Opportunity Portfolio.

(+) Verizon (VZ-US) stock closed up more than 9%, making it the communications company’s best day in almost 15 years. Verizon posted revenue of $33.34 billion, versus the estimated $33.25 billion, and adjusted earnings per share of $1.22, versus the $1.18 estimate. Verizon also beat Wall Street’s expectations for its postpaid phone net additions, adding 100,000 compared to the 62,000 consensus estimate among analysts polled by StreetAccount. Verizon also adjusted its 2023 outlook, saying it expects free cash flow to total more than $18 billion, a $1 billion increase from previous guidance. The last time Verizon had its stock jump like this, the company had not even launched its 4G LTE wireless network in the U.S. The two-day surge came in October 2008 with back-to-back daily increases of 10.1% and 14.6%, respectively. Shares yield 7.90%. Owned in Cash Flow Portfolio.

Weekend Reading

A Few Laws of Getting Rich Charlie Munger was once asked by one of his rich friends if leaving his kids a bunch of money would ruin their drive and ambition. “Of course it will,” Charlie said. “But you still have to do it.” “Why?” the friend asked. “Because if you don’t give them the money they’ll hate you,” Charlie said. COLLAB FUND

November Almanac: Historically, a Top Month, But Softer in Pre-Election Years November begins the “Best Six Months” for the DJIA and S&P 500, and the “Best Eight Months” for NASDAQ. Small caps come into favour during November, but don’t really take off until the last two weeks of the year. TRADERS ALMANAC

The Stages of a Man’s Life Humans have been dividing the human lifespan into distinct stages or steps across time and cultures. Here are different ways writers, sages, and philosophers have divided up the lifespan. ART OF MANLINESS

The future of real estate in a hybrid world Hybrid work has roiled the real estate market—and it’s here to stay, according to new research from the McKinsey Global Institute. MCKINSEY

Can Enbridge’s juicy dividend be trusted? In the past 16 months, the pipeline operator’s shares have lost more than one-quarter of their value as dividend stocks of all kinds have been hammered by surging interest rates and fears of slowing economic growth. As Enbridge’s shares have slumped, its dividend yield has climbed to more than 8%. Given Enbridge’s outsized yield, it’s reasonable to ask: Is the dividend safe? GLOBE & MAIL

10 Lessons from 10-Year College Reunion (1) The Medici Effect is real; (2) Your daily habits show up on your face after 10 years; (3) Insecurity tells, confidence shows; (4) Plans are great, but life will generally laugh at them; (5) Fighting the Zebra Effect is hard (but worth it); (6) Identity is the real thing we're searching for; (7) Freedom is rare, but incredibly apparent; (8) We get more embarrassing with age (or we're just mature enough to embrace it); (9) Shared struggle builds unbreakable bonds; (10) Life is much more fragile than you think. SAHIL BLOOM

Charted: The Key Investment Theme of Each Decade (1950-Today) Over modern history, a key investment theme has broadly characterized each decade. In each case, a particular asset class, sector, or region captivated investors for an extended period, driving returns and outperforming the rest of the market. This graphic shows 70 years of key investment themes. VISUAL CAPITALIST

The Issues Facing House Speaker Johnson Greg Valliere, Chief U.S. Policy Strategist, AGF Investments VALLIERE