June 2020 Portfolio Management Team Update

Elvis Picardo

June 5, 2020

Market & Economic Environment: Global markets advanced for the second month, as U.S. indices posted one of their fastest-ever rebounds from a bear market. Investor optimism over reopening of economies around the world overshadowed a continued run of weak economic data, a steady increase in global coronavirus cases, and deteriorating relations between the U.S. and China.

The TSX added to April’s 10.5% gain with a more sedate 2.8% advance in May, as 10 out of the index’s 11 sectors rose, led by Information Technology (+14.6%) and Consumer Discretionary (+8.1%). The Real Estate sector was the only one in the red for the month, as investment trusts continued to be weighed down by concerns about poor rental collections and potential defaults.

In the U.S., the S&P 500 followed up on its 12.7% April surge with a 4.5% gain in May as it traded over the key 3,000 level. The Dow Jones Industrial Average rose 4.3% in May, while technology mega-caps powered the Nasdaq Composite to a 6.8% gain. The broad global rally enabled the MSCI World Index to advance 4% in the month (Data Source: FactSet).

Our Strategy: While equity markets are discounting a swift, V-shaped economic recovery from the global slowdown inflicted by the pandemic, the reality is that such a recovery may take longer than current optimistic projections. The increased breadth of the equity rally, as well as the rotation from growth to value stocks that was evident last month, are encouraging signs. However, unemployment rates at historic highs, the prospect of a renewed trade war between the U.S. and China, and the looming threat of a second wave of the coronavirus, are headwinds that cannot be ignored altogether.

The Portfolio Management Team (PMT) rebalanced all client portfolios in the first two weeks of May, adding to positions in select securities that were trading at attractive levels. The PMT continues to monitor market conditions closely as we head into the seasonally volatile months of the year.

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