Tuesday, April 10, 2018

April 2018 Outlook

No matter how many times you have experienced stock market corrections, when it arrives it always surprises. So last quarter was no exception, perhaps a little more of a surprise as 2017 was one of the calmest years in many. Canada (TSX) was down -4.5% this quarter while US (S&P 500) broke even. But that belies the high volatility during the quarter and beyond. In fact this was the quarter when solid dividend paying stocks like banks, pipelines and utilities sank while marijuana stocks and resources fared better.

I am sure you have heard the explanations like NAFTA, China and higher interest rates in the U.S. It is the higher and prospects of even higher rates that is a real worry. Political even trade concerns are longer term worries and may or may not come to pass. But higher rates which means higher inflation and brings about a recession is bad for corporate bottom line.

Our strategies work best in lower rate environments so the fear of higher rate has hurt utilities, pipelines, telecom and even banks. We are carefully watching this just in case higher rate environment is here to stay. Some of us do not believe that we are off to a roaring start for decades to come which is what is needed for further rise in rates.

So, carefully we stay put, no significant changes for now.

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