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Stocks rebounded higher in May, with many making new all-time highs in the month. The fundamental conditions that ignited this market rally in late 2022 remain unchanged, and we anticipate the rally will continue.

Our optimism is grounded in the stimulative fiscal policies, especially in the USA, driving a surge in money creation and consequent economic growth. It’s worth noting that the increase in interest rates has led to a significant amount of new money being generated through government Treasury bond interest payments. This has resulted in more money being injected into the economy than what was restricted through dampened credit and lending activity. In essence, raising interest rates in a high debt-to-GDP environment is stimulative because it increases government bond payouts, which are funded entirely by newly created money rather than tax revenue or borrowing.

This influx of new money has spurred impressive GDP growth, strong consumer spending, and robust employment figures. Additionally, the fact that this substantial money creation has occurred alongside declining inflation suggests that the economy’s productive capacity is being effectively utilized, with no immediate risk of higher inflation.

We are now approximately four years into an emerging paradigm of government-led fiscal growth in the West, contrasting with the last 40 years that focused on private credit creation and central bank monetary policy. Moving forward, we expect greater integration between Treasury departments and their central banks, with Treasuries now clearly steering economic policy, at the expense of central bank independence. For those interested in historical analogues, the “Japanese economic miracle” provides a relevant example. In this model, banks may play a different role, acting more as administrators of government policy rather than profit-seeking enterprises. Historically, one feature of government-led growth models is the trend towards monopolistic and oligopolistic conditions, wherein the strong get stronger and the weak get weaker.

In this evolving environment, we believe high-quality stocks are the best hedge against massive government spending. The resultant money printing tends to elevate asset prices, and the trend towards monopoly benefits the largest and most successful firms. Given the stock market’s relative inelasticity in absorbing this new money, we believe stock prices can continue to rise significantly from current levels.

In conclusion, we’d also like to extend our heartfelt thanks for your continued support as we reach new heights of success—recently exceeding the remarkable milestone of $30 billion in assets under administration. Our client-first approach has set us apart from competitors and solidified our position as one of Canada’s fastest-growing wealth management firms. Wellington-Altus’s strong culture of partnership has made it a top destination for talent, more than doubling its headcount since 2019. Today, Wellington-Altus is home to over 820 employees with 53 offices across the country and many accolades to its name. Our leadership team remains laser-focused on the growth trajectory of this great firm. We are grateful to have you on this journey with us and look forward to celebrating more milestones together.

Model Portfolio Highlights

Growth Portfolio
In May, we took some profits on a very successful position in TMX Group, the operator of the Toronto Stock Exchange. The proceeds from this sale were reinvested into another promising Canadian financial company, Definity, which is the parent company of several property and casualty insurance brands. Definity stands out due to its impressive growth and combined ratio, a key measure of underwriting skill.

American Growth Portfolio
We made no changes in May.

Income Portfolio
We made no changes in May.

Small Cap Portfolio
In May we closed positions in Lassonde and Storagevault, and reinvested the proceeds into Silvercrest Metals, Cronos Group, and added to our exiting position in Converge Technologies.

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
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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.

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.