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Market Commentary

November 2023 Update

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The year-end stock market rally we’ve all been eagerly anticipating may have experienced a brief delay in October, but rest assured, it’s far from ruled out. Stock indices dipped over the past month, yet the long-term uptrend remains firmly intact. We are still on the cusp of the most favourable seasonal period for stocks, spanning from October to January. We firmly believe that stock indices are poised to scale new heights in the months to come.

Our current economic landscape is characterized by robust consumer spending, low unemployment, substantial government deficit spending, and (unintentionally) stimulative interest rates. What’s remarkable is the parallel we see to wartime economies of the past, also marked by government stimulus, a central bank playing second fiddle to Treasury, and large deficits. This concept, known as “Fiscal Dominance,” is a driving force behind our economic conditions, and it bodes well for the future.

We expect public companies are set to experience significant earnings growth in the coming quarters. Already, a handful of the largest mega-cap corporations have taken analysts by surprise with earnings reports that far exceeded expectations.

While economic growth hums, we remain on the sidelines when it comes to bonds in the model portfolios. Historically, 10-year government bond yields have had a positive correlation with GDP growth, and today’s yield of about 4.8% (following a US GDP report of 4.9% in late October) seems about right. We do not foresee an immediate catalyst for bond yields to decline or bond prices to appreciate with such a robust economy. Bonds will have their day eventually, but we will wait for them to confirm a new price uptrend before considering a position, adhering to our systematic rules-based investment process.

Now, regarding the recent dip in the S&P 500, which fell ten percent from its mid-year high in July, we view it as a standard, normal-course event. In fact, a drop of ten percent has occurred on average once every one and a half years since 1928. We’ve found the best course of action is to stay the course through these inevitable and manageable dips. In the relatively rare instance that losses intensify, our stop-loss alerts will guide our decision to sell positions and safeguard capital, if necessary. We remain steadfast in monitoring our holdings with utmost discipline.

The silver lining in October was the emergence of pessimistic sentiment, reaching levels seen at major market lows. For instance, the put-call ratio for S&P 500 stocks, a gauge of pessimistic versus optimistic bets in the options market, surged to 1.97 on October 4 – indicative of almost double the number of pessimistic bets as opposed to optimistic ones. In the past, when we’ve encountered such levels, the market has rebounded, with stocks trading higher a year later every time on record. Additionally, the number of stocks trading above their 50-day moving average plummeted to just 15%, last observed when the market hit a major low in October 2022. These episodes of pessimism often act as crucial springboards for more optimistic times, purging short-term traders and laying the foundation for enduring rallies.

Model Portfolio Highlights

Growth Portfolio
We made no changes to the holdings in October.

American Growth Portfolio
We made no changes to the holdings in October.

Income Portfolio
At the beginning of October we proactively adjusted the risk exposure lower in the portfolio, mitigating some of the recent market volatility. We increased exposure to US dividend-paying companies, which not only aligns with our income generation objectives, but also took advantage of a favourable move in the US Dollar / Canadian Dollar exchange rate. Further, we enhanced diversification within the portfolio’s ETFs, while maintaining a focus on growth companies and generating dividends.

Small Cap Portfolio
We exited our defensive holding in KP Tissue with a neutral total return, allowing us to redeploy the capital into four promising new additions: Wesdome Gold, Tecsys, Uranium Royalty Corp, and Cogeco Communications. We expect significant near-term growth in free cashflow from each company, and view their current share prices as significantly undervalued in context of this expected growth. It’s noteworthy that small-cap equities have weathered a period of relative underperformance vs large-caps over the past two years. We anticipate a positive reversal of this trend from the October lows, bringing renewed opportunities in small-caps to the forefront.

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. If you’d like to add a friend or family to this email list, please let me know. 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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