January 2020 Portfolio Management Team Update

Elvis Picardo

January 10, 2020

Market & Economic Environment: Global indices added to their gains in December to cap a stellar year for equities. Investors’ risk appetites were aided last month by lowered trade tensions on the announcement of a “Phase One” trade deal between the U.S. and China, marked dissipation of Brexit uncertainty, and optimism that the Federal Reserve’s accommodative stance on monetary policy would continue. The TSX eked out a 0.14% gain in December, led by energy and commodity stocks, bringing its fourth quarter advance to 2.4%. Overall, the index rose 19.1% in 2019, its best annual return in a decade. U.S. indices hit new highs in December to end the year on a wave of euphoria. The S&P 500 gained in 11 of the final 12 weeks of 2019, surging 28.9% over the year, while the Nasdaq Composite soared 35.2% as both indices posted their best annual performance since 2013; the Dow Jones rose 22.3% in 2019. Most European and Asian equity benchmarks also posted double-digit increases in 2019, with many gaining over 20%.

(Data Source: FactSet)

Our Strategy: After a record year, 2020 has commenced on an ominous note, as geopolitical risk has escalated following the killing of a top Iranian general by a targeted U.S. air strike. Historically, although geopolitical risk has generally proved to be short-lived and has had little effect on equity markets, the present escalation comes at a time of massive investor complacency, exemplified by indices trading near record highs and low market volatility. The Portfolio Management Team (PMT) is monitoring market developments closely, with a view to making appropriate adjustments to client portfolios should the geopolitical or economic environment deteriorate.

Please contact any member of the PMT if you have any questions or concerns regarding your accounts.