For all your days prepare, And meet them ever alike: When you are the anvil, bear – When you are the hammer, strike. – Edwin Markham
Each of the Portfolios supplied better performance than its benchmark over a volatile February. Stocks fell quickly and substantially, particularly the last week of February, on fears that a corona virus pandemic would slow global growth. Our predilection towards value and cashflow helped support our companies so that losses were kept relatively minimal and manageable. That said, with all my bullishness on Canadian energy, most of our energy stocks crossed their loss thresholds and were thus sold to protect capital. Energy weakness was offset by very strong performance from our gold miners, several of which touched new highs in the month. Some other recent additions to the Portfolios finished the month higher. In all, I’m thankful our strategy is working to minimize downside, and that we’ve been able to identify some companies that have bucked the down trend through such a tough month. I consider that promising for our long term objective.
I’m closely watching for central bank responses to corona virus developments. If China is to be a model in this regard, we can expect a new supply of central bank easing to inject liquidity into the markets. The question is how much will the economy grow in relation to the amount of easing delivered? If the economy can sustain even modest growth, the new liquidity would boost asset prices substantially. If the economy slows, the liquidity helps keep the gears greased. While it’s too early to say at this point, there are certain companies and sectors that will be an early “tell”. Until a clear signal emerges, caution is paramount.
Most financial planning centers around the value Advisors bring to the individuals they serve. But corporations are equally important in our mission to provide better service and advice. To that end, when was the last time, as a business owner or plan member, that you looked at your company’s group benefits plan? One of our team members specializes in advising companies in setting up and administering group benefits. If you’d like to review yours, please be in touch. This is particularly important for high income earners who may be under-served by their corporate plans.
A wonderful interview with the father of behavioural economics Daniel Kahneman on developing better decision making, rules-based approaches, and intuition https://fs.blog/daniel-kahneman/