Continue to Give Equities "The Benefit of the Doubt"

Jun 25, 2021 | Nick Scholte


No U.S. recession is in site and, per the message delivered at this week's Western Canadian Portfolio Management Conference, the stage remains set for an overweight in equities.

To my clients:

If you prefer, read this week’s update on my website. Feel free to share the link with family, friends and colleagues:

It was an up week for North American stock markets with the Canadian TSX finishing up 1.2%; the U.S. Dow Jones Index up 3.4%; and the U.S. S&P 500 up 2.7%.

As evidenced by the market data noted above, it was a good week for North American markets. This follows the poor performance seen last week. As I noted near the end of 2020 as the shift toward overweighting equities (relative to each client’s own unique risk tolerance set in their personalized Investment Policy Statement) in client portfolios began, the recovery in both the economy and the markets would not be without bumps in the road – sometimes significant bumps. However, as I recommended then, and continue to recommend now, I encourage clients to look through these periodic bumps. For lack of a better term, these bumps are “noise” that can sometimes distract from the greater message that the recovery continues and that U.S. recession is nowhere in sight. Further to the point, in the absence of a realistic expectation for U.S. recession, equities should be given the “benefit of the doubt”.

This week saw the Western Canadian Portfolio Management Conference for RBC Dominion Securities (virtual of course), and the point made above regarding “give equities the benefit of the doubt except if there is a realistic expectation of U.S. recession” was repeatedly hammered home and supported with a variety of internal economic assessments. All of these assessments indicate no recession at hand and, further, that the broad evidence suggests that the current economic expansion is likely at an early stage.

It’s a very short and simple update this week as I’d like the above to resonate with clients. If I were to add anything, I’d merely note that the handshake deal reached yesterday on a $1 trillion+ U.S. infrastructure package will only further improve the outlook. That said, the “handshake deal” still needs to pass Congress, and that’s an outcome I’d prefer not to handicap at this juncture!

All the best, and remain safe (and cool as a BC heat wave takes hold this weekend!),


Nick Scholte, CIM, FCSI

Vice-President & Portfolio Manager

Scholte Wealth Management
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
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