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The Growth and Income model portfolios performed well in September, continuing their upward trajectory. Over the last year, the Growth Portfolio has climbed 32.9%, the Income Portfolio is up 42.0%, and the American Growth Portfolio has risen by 24.7%. These results reflect our focus on high-quality assets, as we successfully navigated periods of gains and volatility.
The trend towards easing lending conditions that we first identified in our July note is now playing out. This month, the U.S. Federal Reserve cut the federal funds rate by 50 basis points, marking the first reduction since 2020. Following this move, U.S. Federal Reserve Chairman Jerome Powell indicated the possibility of another 50 basis points of cuts by year-end. The anticipated increase in lending demand is already being felt, particularly in the housing sector, where mortgage refinancing activity has surged. We expect this trend to broaden, driving housing activity and increased demand for other lending products, as consumers take advantage of improvements in their debt service ratios made over the past two years. With income growth continuing to outpace inflation, there is more money available to service new debt.
In addition to shifts in monetary policy, fiscal policy remains a key driver of economic activity. Despite the recent rate cut, deficit spending is expected to continue rising, with U.S. Treasury interest payments projected to increase over the next year, and beyond. Since the amount of government debt exceeds gross domestic product (GDP), we expect inflation to gradually align with the average coupon rate on government debt in the coming years, as these coupon payments inject increasing amounts of money into the economy.
Inflation concerns notwithstanding, the growth of government spending relative to GDP is currently running below trend, indicating there is room for the rate of spending to increase by another 8%, just to return to the long-term post-war average. This gap suggests that additional government spending is easily feasible, which would provide further support for economic growth.
The historical context of easing financial conditions and deficit spending is favourable. Periods like the mid-1940s and early 1980s were followed by strong economic expansions fuelled by credit growth and government investment. We believe a similar period of expansion is on the horizon. Today’s combination of easing financial conditions, rising credit growth, and expanding government spending positions us for a potentially extraordinary economic acceleration, reinforcing our bullish outlook for equities. We continue to focus on owning high-quality stocks poised to benefit from government outlays, credit growth, and the dynamics of passive investing.
In our previous two notes, we encouraged clients to contribute additional capital, and we are pleased with the strong response we’ve seen. September presented another excellent opportunity for investment, and we believe it’s not too late to take full advantage of the year ahead. We firmly believe that the current environment offers significant potential for further gains, and we invite you to share in our continued success by introducing friends and family to the opportunities within our portfolios. We are confident that our strategy remains robust, and we look forward to helping all of our valued clients achieve continued prosperity. Thank you for your trust and ongoing support.
Model Portfolio Highlights
Growth Portfolio
In September we took profits on TMX Group and Netflix, and trimmed back gains from Alphabet, Shopify, Mastercard, Colliers and Descartes. We closed Boyd at a loss. With those proceeds, we added new positions in gold miner Kinross, copper miner First Quantum, and Tesla.
American Growth Portfolio
In September we took profits on Kinsale Capital and Netflix, and trimmed Microsoft, Alphabet, Autodesk, Intuit, Moody’s and Amazon. With those proceeds, we added to the existing holding in MSCI, and established new positions in technology companies Keysight, Tesla, and Nvidia.
Income Portfolio
We made no changes to the portfolio in September. We continue to hold a diversified basket of high-quality stocks, allocating two-thirds to American companies and one-third to global companies.
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.
Thank you.
Yours,
Ben
Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book a meeting
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.
Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.
Market Commentary
October 2024 Update
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The Growth and Income model portfolios performed well in September, continuing their upward trajectory. Over the last year, the Growth Portfolio has climbed 32.9%, the Income Portfolio is up 42.0%, and the American Growth Portfolio has risen by 24.7%. These results reflect our focus on high-quality assets, as we successfully navigated periods of gains and volatility.
The trend towards easing lending conditions that we first identified in our July note is now playing out. This month, the U.S. Federal Reserve cut the federal funds rate by 50 basis points, marking the first reduction since 2020. Following this move, U.S. Federal Reserve Chairman Jerome Powell indicated the possibility of another 50 basis points of cuts by year-end. The anticipated increase in lending demand is already being felt, particularly in the housing sector, where mortgage refinancing activity has surged. We expect this trend to broaden, driving housing activity and increased demand for other lending products, as consumers take advantage of improvements in their debt service ratios made over the past two years. With income growth continuing to outpace inflation, there is more money available to service new debt.
In addition to shifts in monetary policy, fiscal policy remains a key driver of economic activity. Despite the recent rate cut, deficit spending is expected to continue rising, with U.S. Treasury interest payments projected to increase over the next year, and beyond. Since the amount of government debt exceeds gross domestic product (GDP), we expect inflation to gradually align with the average coupon rate on government debt in the coming years, as these coupon payments inject increasing amounts of money into the economy.
Inflation concerns notwithstanding, the growth of government spending relative to GDP is currently running below trend, indicating there is room for the rate of spending to increase by another 8%, just to return to the long-term post-war average. This gap suggests that additional government spending is easily feasible, which would provide further support for economic growth.
The historical context of easing financial conditions and deficit spending is favourable. Periods like the mid-1940s and early 1980s were followed by strong economic expansions fuelled by credit growth and government investment. We believe a similar period of expansion is on the horizon. Today’s combination of easing financial conditions, rising credit growth, and expanding government spending positions us for a potentially extraordinary economic acceleration, reinforcing our bullish outlook for equities. We continue to focus on owning high-quality stocks poised to benefit from government outlays, credit growth, and the dynamics of passive investing.
In our previous two notes, we encouraged clients to contribute additional capital, and we are pleased with the strong response we’ve seen. September presented another excellent opportunity for investment, and we believe it’s not too late to take full advantage of the year ahead. We firmly believe that the current environment offers significant potential for further gains, and we invite you to share in our continued success by introducing friends and family to the opportunities within our portfolios. We are confident that our strategy remains robust, and we look forward to helping all of our valued clients achieve continued prosperity. Thank you for your trust and ongoing support.
Model Portfolio Highlights
Growth Portfolio
In September we took profits on TMX Group and Netflix, and trimmed back gains from Alphabet, Shopify, Mastercard, Colliers and Descartes. We closed Boyd at a loss. With those proceeds, we added new positions in gold miner Kinross, copper miner First Quantum, and Tesla.
American Growth Portfolio
In September we took profits on Kinsale Capital and Netflix, and trimmed Microsoft, Alphabet, Autodesk, Intuit, Moody’s and Amazon. With those proceeds, we added to the existing holding in MSCI, and established new positions in technology companies Keysight, Tesla, and Nvidia.
Income Portfolio
We made no changes to the portfolio in September. We continue to hold a diversified basket of high-quality stocks, allocating two-thirds to American companies and one-third to global companies.
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.
Thank you.
Yours,
Ben
Ben W. Kizemchuk
Portfolio Manager & Investment Advisor
Wellington-Altus Private Wealth
Office: 416.369.3024
Email: bwk@wellington-altus.ca
Book a meeting
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.
Performance reporting disclaimer: Performance results reflect the returns of each representative model portfolio. Returns are calculated using each model portfolio’s monthly performance, including changes in securities values, and accrued income (i.e., dividend and interest), against its market value at the closing of the last business day of the previous month. Performance results are expressed in the stated strategy’s base currency and are calculated on a net of fees basis. Individual account performance may materially differ from the representative performance history set out in this document, due to factors such as an account’s size, the length of time the strategy has been held, the timing and amount of deposits and withdrawals, the timing and amount of dividends and other income, and fees and other costs. Investors should seek professional financial advice regarding the appropriateness of investing in any investment strategy or security and no financial decisions should be made solely on the basis of the information provided in this document. This is not an official statement from WAPW. Please refer to your official WAPW statement for your specific performance numbers.
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The opinions contained herein are the opinions of the author and readers should not assume they reflect the opinions or recommendations of Wellington-Altus Private Wealth. Assumptions, opinions and information constitute the author’s judgement as of the date this material and subject to change without notice. We do not warrant the completeness or accuracy of this material, and it should not be relied upon as such. Before acting on any recommendation, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. Graphs and charts are used for illustrative purposes only and do not reflect future values or future performance of any investment. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. All third party products and services referred to or advertised in this presentation are sold by the company or organization named. While these products or services may serve as valuable aids to the independent investor, WAPW does not specifically endorse any of these products or services. The third party products and services referred to, or advertised in this presentation, are available as a convenience to its customers only, and WAPW is not liable for any claims, losses or damages however arising out of any purchase or use of third party products or services. All insurance products and services are offered by life licensed advisors of Wellington-Altus. Wellington-Altus Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. All trademarks are the property of their respective owners.