Ottawa Investment Advisor John Bruce

August 2018 Update

August 8, 2018

August 8, 2018

I hope you are well and are enjoying the warmer weather. I wrote to you three weeks ago about the market environment and the risk that is in the markets. I wanted to provide a brief update for you on what is unfolding now that earnings are being released.

There is an expression that states, “Buy on rumour, sell on news”. Earnings period is a practical application of this belief. As earnings are coming out, many companies are being sold -off by investors regardless of whether the news was really good or mediocre. I tend to see this type of action occurring when the market is getting over extended. That is to say, when the stock indexes have done well and have reached new highs.

Interest rates are rising in the U.S. and the 10 year U.S. Bond Yield hit a high of 3.128% in the middle of July. When bond yields rise, many conservative investors will start to shift out of stocks and into bonds, increasing the number of sellers in the stock market. This puts downward pressure on stock prices.
Add to this the escalating trade war between the U.S. and many other countries and you will have a good argument to take profits if valuations get too lofty, build a good value cash position and dividend paying companies–when the prices start to drop.

When will this happen? Who knows? What I do know is that there is a shift building and that is when I want to keep my eyes out for discounts and value when it happens and have the cash to do it.

I will talk to you if we need to make any adjustments to your portfolio with our existing holdings and let you know when I think the time is right to add to our stocks or even buy some good value bonds.

If you have any questions I will be back in the office on Thursday August 16th. In my absence please direct any inquiries to my assistant, Brian Donegan at 1-844-860-7787.

I wish you and your family a safe and pleasant summer.

Sincerely,

John Bruce
Investment Advisor

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