Good afternoon,

 

Regarding the performance of our three managed strategies, returns as of the end of April had been nicely positive for the year. Since then, May was a down month for us, but we regained ground vs our benchmarks, and June has been nicely positive thus far. So, I’m happy to report that at the time of writing, we are outperforming benchmarks on each strategy (which was not the case on April 30^th). In short, we are positive for the year and ahead of benchmark at time of writing.

 

In my view, there are two main themes that seem to make headlines daily; one being transient (when the debt ceiling agreement will be finalized in the US) and one being far more relevant to long-term investment returns (inflation… what else?). The debt ceiling issue is behind us now, thankfully, with both parties in the US making concessions to reach an agreement. This happened after May month end, so May statements came in much lower than we currently sit. As for the fight against inflation and its outcome, it is an ongoing question – will the consistent interest rate hikes needed to reduce inflation end up causing a recession? And if so, will it be a deep one? Equity markets in the US are telling us that they are firmly undecided. If it weren’t for the ‘big tech’ companies’ outsized returns this year (after being some of the worst performers last year), then the overall S&P 500 index would be only barely positive in 2023 thus far. Up here, the TSX is holding onto a positive gain for the year, barely. Earnings have also been mixed. Some sectors (freight, retail) that enjoyed such huge profits during covid are now seeing that trend reverse. Banks have also been underperformers so far, as the news about smaller regional banks had spooked shareholders earlier in the year. Technology has been a lone bright spot for returns. The advent of AI as a potential new source of huge revenue in this sector has help drive gains. I believe that we will find our way back to solid ground, inflation-wise, without a significant pullback in employment. That said, I think this might take a while, so I will continue to have an eye on the health of corporate balance sheets, which will likely see debt service costs be much higher in the next ten years than they were over previous decade.

 

All this to say that it has been a grind. Stock selection continues to be the most important part of generating returns, and to that end, so far so good. But for those of us that were getting used to the easy money of 2019-2021, the last 18 months or so have been frustrating. I have written in this space in the past that I am not a fan of the expression “in it for the long term”, as it is patronizing and too often used as an excuse. However sometimes, this type of thinking helps maintain focus. I too am guilty of focusing on short term performance, especially versus our benchmarks, but sometimes keeping an eye on longer term returns from the past can be reassuring. Also, using long-term historical valuations to help determine whether companies continue to be good potential investments is also one of the most helpful ways to maintain focus during times when consistent returns have been hard to come by. Yes, our growth strategy underperformed last year. But in the last ten years, we have only underperformed our benchmark in 2 of them. Those are numbers I can live with.

 

Our team is doing well. Marta started maternity leave in April after welcoming baby Milo into their family. Everyone is doing well and, thankfully, Milo is a good sleeper! Shalu has transitioned to her role of Associate Investment Advisor seamlessly, as expected. Many of you have no doubt heard from her as her focus for our team is maintaining client files. She reaches out to make sure that the work we are doing for you continues to be appropriate based on your age, employment status, marital status, risk tolerance (and capacity), and income need. This exercise has become a significant part of what keeps her, and Lauren busy each day – we would like to have constant piece of mind that we are investing appropriately for every client under our care. As usual, if anything has changed for you or your family, please let us know right away.

 

I thank you again on behalf of all four of us. We are honoured to have your trust as our clients and sincerely appreciate your support of our group.

 

George

 

George Wright is an Investment Advisor with CIBC Wood Gundy in Burlington, ON. The views of George Wright do not necessarily reflect those of CIBC World Markets Inc. This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change. CIBC and CIBC World Markets Inc., their affiliates, directors, officers and employees may buy, sell, or hold a position in securities of a company mentioned herein, its affiliates or subsidiaries, and may also perform financial advisory services, investment banking or other services for, or have lending or other credit relationships with the same. CIBC World Markets Inc. and its representatives will receive sales commissions and/or a spread between bid and ask prices if you purchase, sell or hold the securities referred to above. © CIBC World Markets Inc. 2023.