Back to School

I hope you and your family are well and have enjoyed the summer. Students headed back to school this week and some employers have adopted a hybrid model - working 3 days at an office and 2 days working from home.

Concerns are rising yet again about Covid-19, primarily because of the Delta variant, as well as the latest Mu variant. Despite these concerns continued growth is expected for stock markets as the economy slowly reopens. Variants are adding fear and market uncertainty which is never good for stock markets especially when the stock markets are trading at or above their long-term valuations. The difference is we've seen this before. The downside is largely known so corporations, central banks, and governments know how to react and stimulate when and where needed.

The next couple of months could be challenging for stock markets as the momentum from a strong summer rally loses momentum. However it is only a matter of time when vaccines are approved for children under 12. When this breakthrough occurs we will ultimately get past this Covid period.

Canadian Stocks

The outlook for the S&P/TSX index remains positive. The demand for commodities, including oil, and their prices will likely remain near current levels with the potential to continue to increase as the global economic recovery takes hold. While not perfect, the year over year change in the price of oil correlates to the year over year change in the S&P/TSX earnings and, therefore, offers insight into what forward returns may look like. Valuations (price of stocks) appear attractive relative to the last 15 years. This is good news for Canadian stocks.

U.S. Stocks

The US economy is on the path to recovery and is being led by pent-up demand and elevated levels of savings. The markets have staged a very strong and impressive rally driven mainly by valuation or price to earnings expansions. This is typical of an equity market recovery following a recessionary bear market. The next phase of stock market performance is typically driven by a recovery in earnings growth. While not being too optimistic, investors, need to look past any potential near term volatility (drops), as stronger earnings should lead to higher markets for the rest of 2021 into 2022.

International Stocks (non US and Canada)

Europe faces challenges due to the hangover from Brexit deal and Covid creating divides in the Euro region. Emerging markets (led by Asia) should continue to improve. Regardless of the short-term market reaction, pockets of opportunity remain, and long term focused investors stand to benefit.

Fixed Income (bonds)

Exceptionally low interest rates, near 0%, are likely to remain around the world in the near term. Defaults will continue through the recovery as some companies will still fall victim to the impact of the Covid-19 lock downs. In this regard, careful consideration of what bonds are held is paramount.

Conclusion

It has been an incredible and unpredictable run in the stock markets over the last number of years. Despite this run when analyzing alternatives to what to consider with your savings it is difficult not to continue to recommend a similar approach. Keeping in mind your risk tolerance, time horizon, and your objectives. I will continue to explore the many investment options available and recommend a change when warranted.

Looking ahead we should anticipate lower rates of returns than the last few years.

If you should have any questions or concerns do not hesitate to let me know.

Best regards,

Matthew Bishop
Financial Advisor

Source; Manulife Investment Management, Bloomberg, and CI Investments

Source: National Bank – Index returns are for information purposes only and do not represent actual strategy or fund performance and do not reflect the impact of management fees, transaction costs or expenses and investors cannot invest directly in any index.

The information in this newsletter is of a general nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting, or professional advice. Readers should consult their own subject matter experts for advice on the specific circumstances before taking any action. Although every effort has been made to compile this material from reliable sources, no warranty can be made as to its accuracy or completeness. The opinions expressed are those of the owners and writers only. It may contain forward looking predictions/statements that are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus and/or fund fact sheet before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Mutual funds and some segregated funds provided by the fund companies are offered through Worldsource Financial Management Inc., sponsoring mutual fund dealer. Other Products and Services are offered through H&M Bishop Wealth Management.

Patience is a Virtue