June 27th, 2016
Rob Kelland’s Market Commentary
Dear Valued Clients,
Last week the UK voted to leave the E.U. This referendum result was a surprise to many, in fact most. The equity markets had a strong run leading up to the vote. Since the results were announced shares in the UK and elsewhere have drifted down.
We do not see this as a repeat of 2008/2009. It is an important event, but less systemic globally than the events of the US led financial crisis.
We feel the events that unfolded in the UK are symptomatic of similar sentiment being seen globally. This includes other parts of Europe and to some extent in the US, in the run-up to their Presidential election this Fall.
The market’s reaction to the UK vote was to move to perceived “safe havens” such as the US dollar, US bonds, bonds in general and gold.
I am comfortable with our Team’s “Defense First” approach to equity investing. It has served us very well over time. Our Recession Resistant theme remains in place, by investing in names in the following sectors: Utilities, Pipelines, Telcos, Banks and Consumer Staples. We seek dividends, companies with solid balance sheets, low price/earnings multiples where possible and attractive entry points (the ties must be on sale). Quality is key.
These events in the UK will take some time to sort out. This is both a political and financial situation.
As Warren Buffett has often stated, “buy equities when people are fearful, and sell equities when people are greedy”. Many investors are in the fearful camp, which allows us to selectively invest in high quality companies at attractive prices (on sale).
We are not sellers. We are buyers of select securities in a measured manner, over the coming days and weeks.
We have come across some superb articles over the past 3-4 days that we will make available to our clients. These articles present views that we agree with, that are well written and articulated.
We concur that this is a difficult investing climate with interest rates so low. It would be easier if bond or GIC rates were 6.00%. But they are not. As Portfolio Managers and advisors we need to get the Asset Allocation and target rate of return in line. From there, ensure that we are doing our best to maximize returns while minimizing risk. Is it easy currently? No. But by being patient, prudent, high quality, long term, “defense first” investors, our approach has served our clients well.
We are not making major changes to our portfolios. They are currently aligned to our beliefs. Recession resistant, and defensive. We will continue to monitor the markets closely. We are looking to add quality names that may go “on sale” through this process.
We as a Team and individuals Care. We Care very much. We are here to assist and no question is ever too small.
Should you have any questions, thoughts or concerns, please feel free to contact any member of our Team.
My best to each of you for a safe and enjoyable summer.
Thank you very much.
Rob Kelland, CIM®, FCSI®
Director, Wealth Management
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