Commentary

Muddled, Choppy or Downright Miserable

Alright enough already!

We are all growing tired of how muddled the weather has been this year. I for one am growing increasingly frustrated with trying to plan days to get my boat in the water, only to have the forecast change what seems to be six times a day. I have officially given up on the Weather Network App, and lord only knows the radio forecast is equally as mystifying. Days forecasted as rain are sometimes bright and sunny, translating to opportunities lost for planning something special as we await the rain. Days forecasted as sunny are often met with frustration as the forecast changes, or the storm clouds roll in the minute you pull out the lawn mower or the paint brush. Admittedly I get a good laugh at my poor wife taking the patio furniture cushions off and on (sometimes several times a day), all the while muttering in disdain at the clouds up above.

The short bursts of heavy rain, or flash flooding has been interesting this year. I have witnessed many a neighbor clamoring up ladders (sometimes in downright miserable conditions) in a mad effort to clean out their gutters and downspouts. Is this choppy inconsistent weather ever going to end? Are calmer and nicer days soon to be upon us? I truly hope so. All we can do is take all the inputs afforded to us and make a decision based on the most likely possible outcome for each and every day.

The truly hilarious thing is that I can take those very same analogies about our weather and apply them to the current state of the markets….. The muddled range bound (15,000-15,500 on the TSX and 3,000-3,250 on the S&P) atmosphere we are witnessing in North American markets is getting tiresome. Stuck between a sputtering economic reopening, clouded by COVID-19 flareups and eagerly awaiting the announcement of further economic and fiscal stimulus.  With central banks and economists being as useful as the Weather Network App, I must admit my patience is wearing thin on their prognostications.

With good economic news being treated as a nice tail wind for the markets on most days, so are some days with poor economic news as market participants are eagerly awaiting more stimulus. Covid 19 flareups create an equally frustrating waterfall effect on the markets, similar to a shorter-term flash rain storm, often leaving a downtrodden feeling for investors. Unfortunately putting on and ripping off equity exposure in your portfolios depending on hourly news headlines is a little more complicated than my poor wife’s perpetual patio cushion fiasco. Once again, all we can do is take all the inputs afforded to us and make a decision based on the most likely possible outcome for the day.

Much like many home owners have used the pandemic as an opportunity to invest in their home albeit via renovations or back yard improvements, we have been investing in your portfolios. Everyone is hoping for nicer weather to enjoy those renovations and that in the end they will pay “dividends” via enjoyment, quality of life (short-term rewards) and/or home price appreciation (long-term rewards). Darren, Scott and I took advantage of this market drawdown and capitalized on numerous equity and ETF holdings that pay great dividends and purchased them at 30-40% off from their recent highs. We have built strong, robust portfolios that will serve our clients well as long term investors. Many of these holdings have come off their lows, but still remain 20-35% off their recent highs. As the markets continue to repair, the impact of these discounted holdings will be felt in your accounts, all the while the actual monetary dividends will be paying you investment income to enhance your quality of life and enjoyment.

Looking forward, what does the outlook for the weather and the markets have in common? Given that July is upon us, the most probable outcome is that we are headed for some reasonably decent weather ahead. Will there be rain and miserable days? Absolutely. However one would expect the trend for better more consistent days should soon come about and the weather should become slightly more consistent and predictable. The same should apply for the markets at this point, barring a significant reemergence of the virus globally. Will there be down or miserable days? Absolutely. However as the global economy reopens, markets will stabilize, commerce will resume and we should see volatility subside. We expect both the markets and the weather to get back to some sense of normal, sooner rather than later.

We hope you all had a great Canada Day and hope you enjoy some of the nice weather yet to come. Have a great summer.

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