To my clients:
It was an up week for North American stock markets with the Canadian TSX finishing up 0.7%; the U.S. Dow Jones Index up 3.8%; and the U.S. S&P 500 up 3.4%.
These 5 points this week:
1) The Fed’s preferred measure of inflation, the Core PCE Price Index, came in slightly higher than expected at 0.2% month-over-month vs expectations of 0.1%. This stands in mild opposition to the better than expected inflation readings from last weeks Consumer Price Index releases.
2) This morning President Trump said the U.S. was nearing deals with 10 “major” trading partners with Trade Secretary Howard Lutnick further adding that the deals were “imminent”. India is said to be one of the 10 countries. Apparently a refined trade framework with China has already been achieved in the past 24 hours (China confirmed this news). It’s not clear to me if China is amongst the 10 deals referenced or if its refined framework trade deal is a stand-alone development.
3) Unfortunately, also today, Trump terminated trade talks with Canada owing to Canada proceeding with a digital services tax (essentially a 3% tax levied against any online retailer doing business with a Canadian consumer – think of a 3% tax on all Amazon purchases).
4) With the proceeds of last week’s sale of Canadian Tire, I re-established a position in Element Fleet Management (EFN). Recall that EFN was a prior holding that did very well in client portfolios - up about 150% for clients whose accounts were active when I first added the position in January 2021 and held until sold last October. The sale last October was necessitated from the loss of analyst coverage here at RBC and leaving me no meaningful way to track the progress of the company. In the past week, RBC analyst coverage has been re-established, and I’m happy to add this name back to client portfolios.
5) Lastly, a heads up to clients that I’m actively exploring an increase to international exposure in client portfolios, and proportionately reducing the North American equity weighting in both Canada and the U.S. I’ll likely add a dedicated European component as well as modestly increasing broader international exposure via the existing holding in the Capital Group Global Equity Fund. My initial shift (potentially with more to follow over the medium term) will probably be about 5%. I’d expect the move to be executed within the next two weeks.
That’s it for this week. With U.S. markets closed next Friday for July 4th, and my family’s pans to visit with our good friends in Washington State for the day, I will not be writing an update next week. Next update June 27th. All the best,
Nick
Nick Scholte, CIM, FCSI
Senior Portfolio Manager
RBC Dominion Securities Inc. │ Tel: 604.257.7569 │ Fax: 604.235.9950
3200-1055 West Georgia │ Vancouver, BC │ V6E 3P3
Toll Free: 1.844.665.9900 │Email: nick.scholte@rbc.com
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