The US stock market continues to climb higher, with the S&P 500 Index now just one more little uptick away from a 20% rise for 2024 — a surge that’s been about as smooth as it can be. The chart below shows every individual day on the US stock market since 2020: so far this year, the flagship American index has only moved more than 2% in either direction once, when it gained 2.1% back in February. The last time the S&P 500 dropped more than 2% was 512 days ago. Indeed, the last time the index fell 2% (a common occurrence during the more volatile days of 2020 and 2022) was all the way back in early 2023. That was 512 days, or 351 trading sessions, ago. In recent days, the AI trade — which powered much of the gains earlier this year — has given way to a new sentiment, as investors have rewarded smaller stocks. The Russell 2000 Index gained a whopping 3.5%, its fifth straight gain of 1% or more, making it the largest five-day outperformance of small caps versus the S&P 500 on record. Ironically, tech stocks have been the laggards of the last few days. But everything’s relative: technology is still the best performing sector of the year so far (+25% in 2024). We will continue to monitor this rotation, but it is a very welcome development for the continuing health of this bull market.

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

Portfolio Notes

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

(+) Choice Properties Real Estate Investment Trust (CHP.UN-T) reported a steady quarter with in-line results as the company benefited from higher rents, higher capital recoveries, and a $1.7MM bad debt reversal. Occupancy is at 98% (+60bps Y/Y) and received an 8.4% renewal spread with the re-leasing of 46 out of 48 Loblaw spaces. All-in this was a positive quarter with a nice pickup in organic growth, with CHP.UN maintaining a strong balance sheet and sustainable payout ratio to support the 5.5% yield. CHP.UN does trade at a premium to the group and has outperformed the REIT index over the last 12 months, but we continue to like the name for income-oriented clients looking for defensive posturing. Owned in Cash Flow Portfolio.

(-) CrowdStrike (CRWD-US) A major global Microsoft outage happened Friday, disrupting banks, airlines, and emergency services worldwide. Thousands of companies across a range of sectors have reported issues with Microsoft 365 apps and services on Downdetector.com. Microsoft 365 Status announced on X that it was investigating the problem, which began Thursday night, affecting Azure cloud services across the central US. According to multiple posts on social media, the outage has been blamed on an update to security software from CrowdStrike, which caused a problem with Microsoft's Windows. "This is not a security incident or cyberattack. The issue has been identified, isolated and a fix has been deployed," CrowdStrike (CRWD) CEO George Kurtz wrote. Owned in IUS and Opportunity Portfolios.

(-) Eli Lilly (LLY-US) Shares of weight loss drugmakers Eli Lilly and Novo Nordisk extended a multi-day decline this week, losing billions of dollars in market capitalization for two of the world’s biggest companies. The sell-off followed promising early-stage trial results for an oral weight loss drug developed by their European rival Roche. Eli Lilly's Mounjaro users experienced mean loss in body weight of 5.9% at three months, compared to 3.6% for Novo Nordisk's Ozempic users. However, Roche's CT-996 showed a clinically meaningful placebo-adjusted mean weight loss of 6.1% within four weeks. But some good news. Eli Lilly's obesity drug secured approval in China, just a few weeks after its main rival in the GLP-1 market, Novo Nordisk, got the greenlight for its weight-loss therapy Wegovy. Owned in Core, ESG+, Cash Flow and US Portfolios.

(+) Intuitive Surgical (ISRG-US) Shares popped following stronger-than-expected second-quarter results. Intuitive Surgical earned $1.78 per share after adjustments on $2.01 billion of revenue. Intuitive Surgical, Inc. develops and markets the da Vinci Surgical System for minimally invasive surgeries. They also offer the Ion endoluminal system for diagnostic procedures. The company provides stapling, energy, and core instrumentation, along with service and support specialists. They sell products through direct sales teams and have a collaboration agreement with FluoGuide A/S for head & neck cancer. Headquarters are in Sunnyvale, California. Owned in Opportunity Portfolio.

(+) Netflix (NFLX-US) crushed expectations in Q2, reaching 278 million members. Q2 is historically the weakest seasonal quarter for member additions. Yet, Netflix delivered its best non-holiday quarter since the onset of the pandemic—excluding the past year boosted by paid sharing. Advertising was front and center in the shareholder letter: “Ads fulfill two important strategic priorities for Netflix: first they enable us to offer lower prices to consumers; and second, they create an additional revenue and profit stream for the business.” The company plans to test new, in-house ad tech platform in Canada later in 2024 and launch more broadly in 2025. In the US and Canada, Netflix generated $4.30 billion in revenue with 84.11 million paid memberships. Meanwhile, Europe, the Middle East, and Africa saw revenues of $3.01 billion, with 93.96 million memberships. Latin America and Asia-Pacific also showed impressive numbers, contributing $1.20 billion and $1.05 billion in revenue, respectively. Owned in Core and ESG+ Portfolios.

(+) Prologis (PLD-US) San Francisco-based Prologis, the world’s largest industrial property company, posted earnings of $859.8 million, or 92 cents a share, for the three months ended June 30, down from $1.21 billion, or $1.31 a share, a year earlier. Core funds from operations were $1.34 a share, slightly above analysts’ estimates of $1.33 a share. Revenue declined 18%, to $2.01 billion from $2.45 billion in the same quarter last year. Chief Executive Hamid Moghadam said demand for warehouse space is “not as crazy as it was the last couple years, but it’s solid.” The company leased 52 million square feet of space in the second quarter, up 27% from the first quarter. Moghadam said many tenants are expanding their operations within buildings they leased over the past four years in a tight market. Because of that, new leasing over the next few quarters “will be muted, but actually utilization and occupancy and all that—underneath the leased space—will improve,” he said. Artificial intelligence is expected to drive demand for data centers, which Moghadam said gives Prologis “tremendous confidence in future growth.” Prologis now projects earnings per share attributable to common shareholders for 2024 between $3.25 and $3.45, compared with its earlier outlook of $3.15 a share to $3.35 a share. The stock trades at a forward P/FFO of 21x, a discount to its historical long-term average of 25x. We continue to like PLD for its scaled portfolio of well-located industrial facilities, which positions the company well to capitalize on the long-term growth in e-commerce as well as increased industrial real-estate demand from on-shoring/near-shoring and supply chain modernization. In addition, we note that PLD is one of the largest REIT in a declining interest rate environment. We would continue to own the stock and be buyers for income-oriented investors. Shares yield 3.2%. Owned in US Portfolio.

(new) Shopify (SHOP-T) We are back in Shares of Shopify. Performance-wise, Shopify has lagged large cap tech peers (and the broader indices for that matter) year-to-date. Comments on lagging shares. (1) a slowdown in consumer spends, (2) reduced Q2 margin guidance, and (3) the recent rotation from tech into the rest of the market. With respect to (1), Q2 U.S. e-commerce sales is expected to slow to 7.9% (vs 9.2% in Q1). However, SHOP’s GMV is still expected to grow at +20%, implying that the SHOP should continue to take market share. On (2), we view this as a function of growth capex and thus, we’re not concerned about the short-term margin pressure. Finally, on (3), market rotations are always difficult to predict or time. However, time has shown that high-quality businesses with strong economics and competitive advantages have served investors well. We believe Shopify is simplifying the process to operate an online business and is on track to become the DeFacto e-commerce platform for businesses of all sizes. Shopify is set to benefit from significant operating leverage in the years to come in our view. Shares are trading inexpensively at 8.2x EV/Sales. Owned in Core and ESG+ Portfolios.

(~) Super Micro Computer (SMCI-US) We increased our weighting this week. Shares of Super Micro Computer, which makes graphics processing unit servers, rose on the announcement that the company will replace pharmacy chain Walgreens Boots Alliance in the Nasdaq 100 index before the start of trading on July 22nd, 2024. Owned in Opportunity Portfolio.

(+) Taiwan Semi (TSM-US) The world’s largest contract chipmaker, delivered a great quarter — second-quarter revenue of $20.82 billion vs. consensus $20.23 billion — and a guide up on artificial intelligence demand. Semiconductor stocks took a beating Wednesday on news that the Biden administration may clamp down even harder on chip exports to China, while Donald Trump’s comments to Bloomberg raised question about his support for the longtime U.S. ally should be be elected in November. TSMC is a major supplier to Apple and Nvidia, among others. Owned in Cash Flow and Opportunity Portfolios.

(+) UnitedHealth Group Incorporated (UNH-US) is the largest Dow Jones component at just over 8% weight. They reported earnings that were well received lifting the Dow this week. Overall results were better than estimates with both revenues and EPS coming in above street expectations. Management reaffirmed full-year guidance. UNH provided an update on the cyberattack, indicating that it has restored the majority of the affected Change Healthcare service. The Q2 impact was $0.92 per share, and full year impact is expected to be $1.90 to $2.05 per share. UNH also intends to sell its remaining South American operations. The stock has underperformed the S&P 500 YTD mainly due to still high utilization trends post-pandemic and heightened regulatory headline risks during the election year. We continue to like UNH long-term given its scale advantages and envious position to benefit from the aging US demographics. We believe the shares are attractively valued and would be buyers at the current level. Owned in Cash Flow and US Portfolios.

(~) Viking Therapeutics (VKTX-US) has pulled back in recent weeks and we added to shares. Viking is one of the contenders in the weight loss drug space. I believe there’s a good chance VKTX gets bought out by one of the big pharmaceutical companies. The current technicals give us a good spot to enter. Viking Therapeutic's VK2735 drug has shown outstanding efficacy at 12-weeks treatment and, remarkably, has not yet found its maximum tolerated dose. Owned in Opportunity Portfolio.

Company Of The Week: Shopify

INVESTOR DAY PRESENTATION

Weekend Reading

RBC Canadian Inflation Watch All told, we expect the BoC will carry on with easing the monetary brakes on a weak economy and follow up with another rate cut at its July meeting next week. RBC ECONOMICS

How Much Money You Need For Retirement Plans change. Returns vary. Inflation is unpredictable. Spending patterns evolve as you age. There are one-off items you can’t plan for. Either way, you still must plan for retirement, set expectations and make decisions about an unknowable future. BEN CARLSON

The Silent Force Driving Success in Life and Investing When we hear stories of success, we often attribute achievements solely to talent, hard work, and individual brilliance. While these factors are undeniably important, luck —both good and bad — plays a significant role in shaping our paths. SAFAL NIVESHAK

My Brilliant Friend was voted the book of the 21st century Elena Ferrante’s novel about two girls in Naples, Italy, won over the majority of the 500 writers, editors and librarians who voted for the New York Times’ 100 best books published after 1999. NEW YORK TIMES

Contenders in the weight loss drug space Stifel shared a massive 340-page slide deck on the weight loss drug space and the race. STIFEL RESEARCH

The Paris Olympic Torch Arrived in a Custom Louis Vuitton Trunk The flame was first carried by torchbearer and French soccer legend Thierry Henry. ROBB REPORT

Have you heard of the Wallenberg family? In the 1970s, businesses under their control employed 40% of Sweden's industrial workforce and represented 40% of the Stockholm Stock Exchange's total worth. QUARTR

Embracing Demographic Transition Health and Wealth in an Aging World. One of the most dramatic societal shifts of the 21st century will be the demographic transition to a population that is older than it ever has been. In the nineteenth century, no continent had a life expectancy of more than 40 years. By 2019, the average person could expect to live to 73 years old. Driven by declining childhood mortality and improved access to high-quality healthcare, these gains in life expectancy are an extraordinary achievement of global development. CITI GPS