Ottawa Investment Advisor John Bruce

August 2017 Update

August 25, 2017 · Print This Article

Earnings season is in full swing for this quarter and I am seeing some odd and unusual market gyrations that I wish to comment on. I keep hearing the different talking heads on the business news shows like BNN and CNN talk about how one market is overvalued while another says it is undervalued to be followed up by yet another expert stating the market is fully valued. What is apparent here is that everyone has an opinion and no one knows what the future holds for the markets or anything for that matter.

I see a company report their quarterly results that far exceed expectations only to be sold off dramatically with huge gap down opens that do not give you a chance to exit or a company missing expectations altogether, only to jump higher as well for no positive reason. What my experience tells me is that it may be time to take profits on our winners and stay in cash for a period of time to await the turbulence and volatility to subside.

We are being tripped up by conflict between global leaders with their sabre rattling and bravado, irresponsible politicians introducing tax policies that are historically bad to do to any market and treaties in trade being prepared to be thrown out. In other words, more noise to navigate through to determine what companies are good value, overvalued or undervalued and position ourselves accordingly.

Here are my concerns and how they relate to your holdings; If we choose to sell some of your investments, it will likely mean that we sell those investments that are becoming too speculative, highly overvalued or unrealistically overvalued. The end result is that if we sell off winners you may be left holding investments that may be down at this time but I believe will not only return to positivity but become winners in time. The investment market is not a market to give us instant gratification regularly. I have found that during these times in the market cycle, if the cycle persists or worsens a negative impact will be had on my client’s mindset and create worry, doom and gloom. They will no longer see the winners in black in their holdings as we will have sold them and all they may see are those holdings that are currently down in red. I will hear comments like, “why are we holding these dogs?” or “why do we have so many losers?”

When we sit on cash I invest in the Laurentian Bank BTB High Interest savings account that pays out a competitive interest rate, and is liquid and can be sold and received in one day after selling. I have seldom seen, over the last 20 years, market conditions that would have me sitting on cash deposits longer than six months due to high risk markets. Even after the crash of 2008, we were buying back into the financials within two to three months following the worst market conditions since the crash of 1929. Remember, there is no down side risk to holding cash.

Suffice it to say, I do not feel that the markets are experiencing nor facing anything like we saw in the 2008 crash, but caution needs to be taken and I think that if we do sell off many of our holdings, it will put us in cash to buy back in if larger dips occur.

I will be calling all of my clients to discuss how to implement positive changes to position us to be profitable. Please return my call asap so that we do not delay adjusting our strategy for the future.

If you have any questions about your portfolio or any changes you would like to discuss, please contact my office at 613-491-3344 or toll free at 1-866-860-4190.

Sincerely,

John S. Bruce
Investment Advisor

The information in this letter is derived from various sources, including CI Investments, Signature Global Asset Management, Cambridge Global Asset Management, Globe and Mail, National Post, Bloomberg, Yahoo Canada Finance, and Trading Economics. Index information was provided by TD Newcrest and PC Bond, and all quoted equity index returns are on a total return basis (including dividends). This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances.

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