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Market Commentary

July 2022 Update

Stocks and bonds fell for the first half of June before rallying strongly into the end of the month. As of the writing of this note on June 28th, Growth is down 2.2% over the last year, Income is down 2.3%, American Growth is up 5.4%, and Small Cap is down 14.6%.

Though declines are not a pleasant experience, we welcome the substantial outperformance, keeping in mind that our portfolios are starting their recoveries from comparatively higher ground. Our view is that high quality stocks have seen their lows for this cycle and that gains are more likely than usual going into year-end, making this a particularly advantageous time to put money to work.

We offer six reasons to remain optimistic:

  1. Pension flows continue: The largest source of buying inflows to the stock market are the automatic monthly payroll contributions to employee pension and retirement plans, and target date funds. Every month those plans buy stocks and lots of them. As long as people remain employed, those flows continue, buoying the market.
  2. “Buy the Dip” psychology: Since the Great Financial Crisis of 2008, every market dip has resolved higher within an average of 10 months. The flash crash of 2010, USA losing its AAA credit rating in 2011, the election dip in 2015, the 2018 drop in tech, and the COVID-19 crash of 2020 each saw the S&P 500 drop by more than 15%. The market recovered each time, effectively training a decade of investors to put their cash to work and buy the dip.
  3. The “Fed Put”: Since the Russian debt crisis of 1996, investors have come to rely on the US Federal Reserve to provide liquidity and backstop lending when markets get too volatile. The “Fed Put” uses options terminology to describe this Fed-to-the-rescue thinking and assumes the Fed must continue on this course to ensure long-run economic growth and employment.
  4. Fundamentals: Stocks are priced relatively cheaper today at 19x earnings than they were a year ago at 27x earnings. For many industries, cashflows have grown over the year, and though profit margins show some compression lately, they remain close to their highs.
  5. The Economy: Despite pessimistic news headlines, western economies are still growing, albeit at a slower pace than a year ago. Yes, inflation has slowed things down and retail stores have to offer some bigger discounts to entice shoppers, but on the whole people are still shopping, corporations are still spending, and service sectors keep chugging along. There still may be a recession in the future, but market prices today have already discounted that probability, in our opinion.
  6. TINA: There is no alternative. Buying stocks may not feel ideal right now, until you look at the alternatives. Cash offers a guaranteed negative return after inflation, as do most fixed income investments after inflation and taxes. Gold isn’t glittering, as its price has been moving sideways for two years now, while other commodities and crypto are just too volatile for most people to have meaningful allocations. Canadian real estate cap rates are high enough to imply some positive return after inflation and taxes. Of all the major investible asset classes, stocks still offer the highest real returns.

Model Portfolio Highlights

Growth Portfolio
In June we took partial profits on Dollarama and Loblaws to buy a new position in Pembina Pipeline. Pembina transports petroleum products through key hubs in Canada and the US. The stock sports an attractive dividend yield which we believe has some room to grow, and will likely attract investors as markets stabilize and interest rates halt their ascent.

American Growth Portfolio
We made no changes to the portfolio in June.

Income Portfolio
In June we sold our real estate position and purchased a basket of US blue chip dividend stocks, taking advantage of the recent market volatility. We see the USD exposure acting as a valuable “hedged growth” opportunity, whereby on the market’s down days the USD usually goes up, making for less downside. This helps protect the portfolio while still exposing us to the eventual upside of recovering prices plus dividends along the way. We believe this should lower the portfolio’s volatility while preserving our conservative growth and income objective.

Small Cap Portfolio
We made no changes to the portfolio in June.

Across all portfolios we look for mispriced opportunities, considering only those with a significant margin of safety and minimal risk of permanent capital loss. After identifying such opportunities, patience is the most important factor in realizing our expected long term return.

If you have any questions about your portfolio, financial planning or investments please be in touch. Click to book a meeting:

Thank you.



Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth

Office: 416.369.3024
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Ben Kizemchuk offers full service wealth management for high net worth Canadians including families, business owners, and successful professionals. Ben and his team provide investment advice, financial planning, tax minimization strategies, and retirement planning.

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