Growing Your Wealth Your Way

We are able to provide a wide variety of investment choices including mutual funds, ETFs, stocks, and bonds.

We are an independent investment service. The investment decisions we develop with you are not tied to any directive or incentive to promote specific products. We assist you to design a portfolio that aligns with your objectives.

Making Investment Decisions in Volatile Markets – Part II

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Political, Economic, Social, Technological, Environmental, and Legal.

In our June commentary, we pulled together some of the key economic indicators related to current market volatility. If you want to review that blog, click here.

Since June a lot has happened, but when you cut through the noise, not that much has changed.




Investor Fear is Moderating

Investor fear as measured by the Volatility Index (VIX) has moderated somewhat, but it is still well above the long-term average.

Inflation is Moderating but Still too High

There are signs that inflation is moderating but it is still much too high. Canada’s July inflation rate of 7.59% was down from the June high of 8.13%, reflecting a decline in the cost of energy and food. While still painfully high, at least the torrid pace of increasing prices has slowed. The long-term average is 3.13%.

Even without energy and food, the core Inflation rate for July was 5.53%, up from 5.33% last month.

The Market Rallied in July

We had a rally in the equity markets in July. It could mark the turnaround, but the more probable scenario is that the bear market continues its downward trend. Either way, it is important to keep a strategic perspective – to look past the current declines and remain focused on the factors and themes that provide guidance and long-term investment success.

More Volatility is Expected

Historically the period from mid-August to mid-October is the most volatile time of year for equity markets. In addition to this seasonal volatility there are continuing and possibly escalating geopolitical tensions and uncertainties. The war in Ukraine continues. The anti-democracy movement in the United States appears to be gaining momentum. In the run-up to the US mid-term elections in November, more social unrest, political violence, and domestic terrorism is expected.




Focus on Investment Themes and Factors

It is important not to get caught up in the political narrative. If you can be patient and avoid “short-termism,” you can always find opportunities to pursue. Considering the anticipated volatility, we are recommending continued caution, but it is time to start moving gradually (“layering”) into new holdings or investment strategies. This is sometimes referred to as dollar cost averaging.

Focus on the investment themes that are prominent now and that are expected to dominate for the rest of this decade. Here is a sampling:

Digitization and migration to the cloud is a powerful trend. Businesses are not going to stop spending on these technological advances even if we have a global economic slowdown or recession.

Onshoring or near-shoring and automation has become a significant trend because of the experience of the pandemic and continuing political tensions between world powers. All sorts of businesses are impacted by this. The US is making substantial progress in bringing home key manufacturing capacity and in creating relationships with Canadian and Mexican suppliers who are near the US. Robotics is booming in this era of deglobalization.

Alternative energy sources and electric vehicles are the focus of much innovation and increased interest due to the Russian invasion of Ukraine. Reliable energy sources – traditional and renewable – are required as the global energy demand continues to rise.

Remote health, telemedicine and precision healthcare are leading us to a brighter future in the delivery of healthcare. Biotech is making major breakthroughs in many different fields of medicine.

Focus on the factors that meet your investment objectives. Currently the factor of quality is at the top of our list. We are in the later stage of the business cycle when quality and momentum are desired factors.


Using Factors to Navigate the Business Cycle



Discipline at this stage of a bear market is always challenging. Initially fear of loss sets in. Then, at the first sign of a turnaround (or bear market rally), this fear often gives way to FOMO, the fear of missing out. During periods of uncertainty, it is particularly beneficial to use rules-based decision-making frameworks. Long-term investment success rarely comes from decisions based on emotion, whether that emotion is fear or greed.

To assist us to understand shifts in market direction and to manage portfolio risk, we use several technical tools and research services. If you’re interested, here is an overview of how we use one such service – SIA Charts.

If you are curious and want to explore our approach in greater detail, add it to the agenda for your next portfolio review.

In the meantime, enjoy the remaining summer days and we’ll be in touch regarding portfolio rebalancing.



The information in this commentary is for informational purposes only and is not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

Making Investment Decisions in Volatile Markets

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Since the beginning of the year, we have been enduring a punishing correction in the financial markets. In Canada, the decline may not be enough to fit the textbook definition of a “bear” market, but by all other factors we’ve been experiencing a “bear at work”.


A market correction is defined as a decline of more than 10% from peak to trough and it happens every couple of years.

A bear market is defined as a decline of 20% or more from peak to trough and it typically occurs every 8 or 10 years. The average length of a bear market is 6 to 9 months.

Corrections and bear markets are a normal part of the investment landscape. When it happens it’s disconcerting for investors since there are few places to hide. Bonds usually act as a buffer when equity prices are falling. Not this time. Since the beginning of the year, both the bond and equity markets have moved in the same direction – down.


To avoid overreacting in the face of dramatic world events, investors need to cut through the noise. And today the noise is deafening!

It’s hard to stay focused on your longer-term investment objectives when you see the world struggling with a global pandemic, housing prices at record-breaking levels, out-of-control food and gas prices, the war in Ukraine, and even the risk of a third world war. When “short-termism” sets in, it is difficult to stay the course and prevent the fear and uncertainty from hijacking your commitment to a disciplined investment strategy.

Fear and uncertainty lead to volatility in the financial markets. So far this year the Volatility Index (VIX), a measure of short-term volatility (for the next 30 days), has been above its long-term average. On Friday it closed high at 26.09 compared to the long-term average of 19.09. Monday It jumped to 27.75. Markets are going to continue to be choppy. This is good news for seasoned investors who understand that volatility spells opportunity, but it is not the only consideration. Today’s geopolitical risks are extremely high and need to be factored more heavily into investment decisions.




First the good news.

Canada’s unemployment rate is at a record low – at 5.1%, the lowest in 45 years.

Wages are increasing – up 3.9% in May for hourly wage earners, up from 3.3% in April, and hitting 4.5% for permanent workers, up from 3.4% in April.

Job growth is strong. In the last 12 months, the Canadian economy created over 1 million jobs – there are 500,000 more jobs than pre-pandemic.

Interest rates are normalizing. When interest rates are abnormally low and credit is easily obtained, the lines between investment, entertainment, and gambling become blurred. Investors start putting money into speculative ventures and “get rich quick” schemes.

Canadian commodities are commanding high prices on world markets.

The Bank of Canada recently cancelled its ultra-long (50-year) bond auction that had been scheduled for this month. The Canadian economy is surprisingly resilient and does not need to add more debt to the balance sheet.


And now the bad news:

Inflation is surging. The April 2022 inflation rate for Canada was 6.77%, up from 4.80% at the end of last December. Core inflation, which excludes the volatile prices of food and energy, was at 4.62%, up from 3.40% in December 2021.


There are many reasons why inflation has increased so much in such a short time.

  • The strength of the Canadian economy means we have a tight labour market. Employers must be more competitive on wages, benefits, working conditions, and other perks. This is inflationary.
  • Supply chain disruptions persist due to Covid-related shutdowns and the war in Ukraine.
  • Extreme weather conditions have affected food sources around the world. The fear of a food shortage is prompting higher demand and higher prices.
  • The war in Ukraine is stoking fear of out-of-control inflation because of high food and energy prices.
    • Ukraine, the “breadbasket of the world”, is the 4th largest exporter of grain globally. Many developing nations in Africa and Asia rely on the wheat from Ukraine. Russia is blocking the grain exports, using this as leverage to get the West to remove sanctions placed on Russia.
    • The war in Ukraine is driving the shortage of oil and gas in a world still reliant on fossil fuels. We feel the impact of the higher gas prices at the pumps.

Inflation is rising around the world. If it persists, it will slow global economic growth and possibly lead to a global recession.

Interest rates are rising. After decades of declining bond yields and even negative real interest rates, the tide has turned. A major transition is underway as central banks increase rates to curb inflationary pressures. Over 60 central banks around the world have increased their interest rates since the beginning of the year.

The Bank of Canada has been aggressive, raising the overnight rate from 0.25% at the start of the year to 1.50% as of June 1. This in turn has prompted the chartered banks to increase their prime lending rate from 2.45% on January 1, 2022, to an average of 3.70% on June 1.

In its analysis of US stock performance in the early phases of Fed tightening cycles, BCA Research concluded that typically stocks “wobble” in the first few months following the initial rate hike, but they end higher over a 12-month horizon. So far, it’s been quite the wobble, but if this post-Fed Reserve tightening pattern also applies to Canada, it fits with expectations that the second half of this year will see more resilient markets.

Rising interest rates do not mean that equity markets can’t function. Historically they have performed well when interest rates were in the 3.5% to 5% range.

Canadian household debt is high. Data released last week by the Bank of Canada in their annual Financial System Review – 2022 indicate that:

  • the share of Canadian households with a debt-to-income ratio of 350% or more increased from 16% to 19%; one in 5 households are heavily indebted and vulnerable to interest rate increases.
  • about a third of Canadian households have a mortgage – 15% of them have a debt-to-income ratio of 450% or more, a variable rate, and an amortization period greater than 25 years. Looking forward housing prices are expected to fall. This will put more pressure on these Canadians.

The market correction has been deep. Spurred by the prospect of rising interest rates, the decline started in technology and innovation stocks, then spread to other sectors. There has been a rotation out of growth stocks and into value.

The volatility in the bond markets has been more dramatic than expected, but it hasn’t come as a total surprise. We’ve been preparing for it for the last few years by moving to Aligned Capital Partners to have greater access to private equity and credit, reducing allocations to fixed income, and increasing your cash holdings and/or adding real/tangible assets and alternative asset strategies.

Economic growth is slowing, not just in Canada and the US but also globally. The US is very close to being in a recession according to the definition of two consecutive quarters of negative GDP growth – the first quarter of 2022 was negative. Although possible, it is unlikely that Canada will slip into a recession over the next 12-months. If it does, it will be shallow and short-lived. Because of our size and proximity to the US, Canadian markets usually follow trends in the US. This time the strength of our commodities markets may enable us to avoid a recession. What happens in Ukraine is an important factor.



If your portfolio is well-diversified, especially if it has been enhanced with real estate and infrastructure, resources, and other commodities, it will stand the test of any bear market. 

In an interview at the Davos World Economic Summit in May of this year, Goldman Sachs strategist Vicki Chang suggested that the correction in the equity markets has created some of the best long-term opportunities ever. With the extreme geopolitical events of our time, the challenge is in finding how best to capitalize on such opportunities.

The investments that offer relative value are becoming easier to identify but when will the trend turn more positive? When will the selling frenzy end? It will require signs of inflation moderating. This could come quickly. Much depends on the war in Ukraine.

Equities are seen as a store of value in the face of inflation. In our next portfolio rebalancing, we’ll be increasing allocations to equities that rank high on the “Quality” factor. Global small-cap value funds will be of interest, as will healthcare, infrastructure, technology, and commodities.

Fixed-income assets, such as short-term government and corporate bonds, floating-rate loans, and GICs provide some security in uncertain times. We’ll be increasing allocations to bonds or bond funds/ETFs as the interest rate increases plateau. If you want to hold GICs, the rates are higher than they have been for many years. We don’t tend to recommend them because they do not keep up with inflation, but if you want to check out the rates, give us a call.

Continue to be defensive for now but stay primed and ready to act as soon as the short-term market indicators stop trending downward. If you have any questions about the contents of this commentary or how your portfolio is performing, let us know.



Canada’s Unemployment Rate Drops to Record Low 5.1%, Wage Gains Accelerate – Bloomberg

The Daily — Labour Force Survey, May 2022 (


The information in this commentary is for informational purposes only and is not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

Time to dig deeper

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Are you aware that by the end of 2021 the top 10 stocks represented a disproportionately large weighting, about 1/3 of the total market value, of the S&P 500? This calculation is based on the stock price and the number of shares issued. The S&P 500 is a market capitalization index. While these top 10 boomed last year, the other 490+1 stocks struggled. If you dig deeper, what the index has been showing as record-breaking returns, was actually an indication of the overinflated valuation of the selected few listed below.

  1. Apple (APPL),
  2. Microsoft (MSFT),
  3. GOOG & GOOGL (Alphabet Inc.),
  4. Amazon (AMZN),
  5. Tesla (TSLA),
  6. Facebook (FB),
  7. Nvidia Corporation (NVDA),
  8. Berkshire Hathaway (BRK.B),
  9. JP Morgan Chase & Co. (JPM),
  10. UnitedHealth Group Incorporated (UNH)

To put this into further perspective a 1% gain in the top 10 is about the same as a 1% gain in the bottom 90%. (source Advisor Analyst). We have our eye on the top 10 but have a much keener interest in finding value in the bottom 490+.

Since the beginning of 2022, these stocks, primarily technology, have been declining in price. It’s not surprising that investors have decided to take some profits and move their money to sectors that are undervalued at this time. Rapid rotation away from last year’s winners often occurs in January. The fear of inflation and rising interest rates has also spooked investors. The rotation is dramatic, but if you’ve been disciplined in your allocation to technology, although unsettling it does not warrant panic. This correction will be beneficial to remove some of the risk-taking and foolish speculation from the marketplace, but technology-driven innovation is going to continue to evolve.

The investment landscape has been changing rapidly in light of the pandemic and its economic ramifications. We’ve been further strengthening our investment toolkit, in terms of research and also access to high-quality institutional managers typically available to the ultra-wealthy. Tune in, we look forward to introducing new strategies soon.


1 At this time there are actually 505 listings in the S&P 500 Index. Companies like Alphabet have more than one class of shares (GOOG and GOOGL).


The information in this commentary is for informational purposes only and is not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

Back to School – Expand Your Investment Vocabulary

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Global innovation requires a whole new vocabulary. Take the quiz below to test your knowledge.

There’s an ETF for that!

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Our way of life is changing because of the pandemic. Investing is also evolving. As we win the battle against Covid-19, are there specific investment trends that interest you? Perhaps you want to capture the trends in travel or healthcare? Or robotics, clean energy, infrastructure? If you want to do so without the risk of owning individual stocks, it may be time for you to join the many investors who are moving money into exchange-traded funds (ETFs).

As of September 30, 2020, according to the Canadian ETF Association (CETFA) there were 833 ETFs available for purchase through 38 Sponsors. In October an additional 8 were launched to bring that total to 841. During the first 10 months of 2020 investors deposited a whopping $34 billion into Canadian-issued ETFs (source). If you include all of the US-issued ETFs also available to you, whatever trend you’re following, it is quite likely you’ll find an ETF for that.

What Is an Index? 

An index is a method to track the performance of some group of assets in a standardized way. An index typically measures the performance of a basket of securities intended to replicate a certain area of the market. An index may be broad-based to capture an entire market such as the S&P/TSX Composite Index, the Standard & Poor’s 500 (S&P 500) or the Dow Jones Industrial Average (DJIA), or it may be more specialized, sector-specific, such as an index that tracks a particular industry or segment (source).

Because you cannot invest directly in an index, the investment industry created the exchange-traded fund structure to capture index-like returns. Investors earn the performance of the index minus the small cost of operating the ETF.

What is an Exchange Traded Fund (ETF)?

An ETF is a basket of securities that is traded on a stock exchange. The securities may include stocks, bonds, commodities, precious metals, currencies, or other asset classes. ETFs are designed to replicate the performance of an index such as the S&P/TSX Composite or S&P 500. Most ETFs are traditional Index ETFs, created as either Passive or Smart Beta. Arriving on the scene more recently are ETFs that are not based on the performance of an index but rather on the performance of an actively managed basket of securities.

Index ETFs

  • A Passive ETF tracks a broad-based market index – it is simple and inexpensive; your investment will deliver the performance of the index minus a small cost for operating the ETF; volatility is similar to that of the index.
  • An ETF described as Smart Beta is created using rules (mathematical algorithms) to create a subset of a passive index, rules designed to include only securities that meet specific criteria. There is no portfolio manager picking individual stocks or bonds.

Actively Managed ETFs

  • ETFs described as Actively Managed mirror the performance of an actively managed basket of securities. Instead of replicating a passive index, some of these ETFs will replicate the behaviour of an existing mutual fund.

An ETF is more like a stock than a mutual fund. When you purchase an ETF you buy a specific number of units (shares). You can’t buy a piece of an ETF unit/share, so the total cost of the investment depends upon the price at which the ETF units were trading when the order was placed. This is in contrast with a mutual fund where you can specify the exact dollar amount to be invested. The mutual fund company handles the calculations and issues partial units as required.

As investors embrace ETFs the expectation is better long-term performance than mutual funds due to lower fees. Lower cost is one reason to select an ETF, but there are other considerations as well. The following chart explains the differences in further detail.

ETFs vs Mutual Funds chart

Click chart to enlarge.

Here are just a few of the ETFs available to Canadians

This list is not to be construed as our recommended picklist but rather a sampling to give you an idea of the range of ETFs available. Some are examples of ETFs that passively track a broad index whereas others apply specific rules to achieve a more focused basket of securities.

XCS – iShares S&P/TSX SmallCap Index ETF

“Small” and nimble (a smallcap company is valued between $300 million to $2 billion), Blackrock’s XCS ETF replicates the S&P/TSX Small Cap Index.

  • top holdings: Great Canadian Gaming Corp – Hudbay Minerals Inc – Whitecap Resources Inc – North West Company Inc – Trillium Therapeutics Inc (as of Nov 24, 2020)
  • medium to high-risk
  • management expense ratio (MER): 0.60%
  • considered a “passive” ETF

ESG – Invesco SP 500 ESG Index ETF

ESG (Environmental, Social, and Governance) investing has been an emerging trend for several years but under the current circumstances may be more relevant than ever before. The acronym ESG is defined as a measuring stick for evaluating companies on their sustainability and ethical impact. The ESG ETF integrates the core principles of ESG and seeks to replicate the S&P 500 ESG Index.

  • top 5 holdings: Apple Inc – Microsoft Corp – Inc – Facebook Inc – Alphabet Inc (as of Nov 24, 2020)
  • provides primarily US exposure
  • low to medium risk
  • management expense ratio (MER): 0.15%.
  • considered a “passive” ETF


Did we catch you thinking “he shoots, he scores!”? Oh, how we miss our Winnipeg Jets! This global ETF however isn’t concerned with hockey – it provides exposure to the hard-hit airline industry. Maybe you want to be in a position to “take off’ when the airlines are back in full force. Did we mention that we have access to purchase US ETFs in US dollars? We can, and JETS is one of those ETFs.

  • top holdings: Delta Air Lines Inc Del – Southwest Airlines Co – Air Canada – Air France-KLM – Singapore Airlines (as of Nov 24, 2020)
  • high-risk
  • management expense ratio (MER): 0.60%.
  • uses a smart beta strategy to track the global airline industry

CARS – Evolve Automobile Innovation Index Fund

If you want to “ride” emerging trends in the automotive sector, CARS will provide exposure to companies in the business of electric drivetrains, autonomous driving, or network connected services for automobiles. CARS seeks to replicate the Solactive Future Cars Index.

  • top 5 holdings: FuelCell Energy Inc – NIO Inc – Kandi Technologies Group Inc – Visteon Corp – Plug Power Inc (as of Nov 24, 2020)
  • global equity exposure
  • high-risk
  • management fee: 0.40% (plus applicable taxes)
  • considered a “passive” ETF

COW – iShares Global Agriculture Index ETF

Are you a little bit Country or are you a little bit Rock n’ Roll? This ETF provides exposure to agricultural companies that produce things like fertilizer, farm machinery, and packaged meats.

COW replicates the Manulife Investment Management Global Agriculture Index.

  • top holdings: Corteva Inc – Deere – Tractor Supply Ltd – Bunge Ltd – Scotts Miracle Gro (as of November 24, 2020)
  • 85% exposure to the US
  • medium risk
  • management expense ratio (MER): 0.71%.
  • considered a “passive” ETF

RBOT – Horizons Robotics and Automation Index ETF

Remember the Jetsons robotic housekeeper Rosie? They knew back in 1962 that robotics was the way of the future. This ETF provides exposure to robotics and artificial intelligence. RBOT seeks to replicate Indxx Global Robotics & Artificial Intelligence Thematic Index.

  • top holdings: Nvidia Corp – Fanuc Corp – Intuitive Surgical Inc – Abb Ltd – Keyence Corp (as of November 24, 2020)
  • medium to high risk
  • management expense ratio (MER): 0.60%.
  • passive strategy

Other ETF examples include:

CWW – iShares Global Water Index ETF

EDGE – Evolve Innovation Index Fund

CYBR – Evolve Cyber Security Index Fund

HBLK – Blockchain Technologies ETF

DISC – BMO Global Consumer Discretionary Hedged to CAD Index ETF

XEM – iShares MSCI Emerging Markets Index ETF

CHNA.B – CI ICBCCS S&P China 500 Index ETF

XGD – iShares S&P/TSX Global Gold Index ETF

XFIN – iShares S&P/TSX Capped Financials Index ETF

XRE – iShares S&P/TSX Capped REIT Index ETF

XIT – iShares S&P/TSX Capped Information Technology Index ETF

What kind of ETF is right for you?

ETFs need to be selected on the basis of your investment objectives and time horizon. If you have not yet explored the addition of ETFs to your portfolio, please schedule a review of your investment strategy.


The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

It’s a “K”! – Economic Recovery Re-Envisioned

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In the last blog, we talked about the “Shape of the economic recovery and what’s next for investors”. We reviewed the L, U, V, W, square root, and swoosh shapes.

In reality, for investors the recovery in North America is proving to be K-shaped. After the downward plunge in March, recovery came fast and furious for select sectors of the economy including:

  • Technology (e.g. Shopify, Apple, Microsoft, Alphabet/Google),
  • Consumer Discretionary (e.g. Amazon, Etsy, Home Depot),
  • Communications and Entertainment (e.g. Zoom, DocuSign, Netflix),
  • Healthcare (e.g. Abbott Laboratories, CRISPR Therapeutics, Trillium Therapeutics, Moderna)

The remaining sectors have been on a downward path since the pandemic was declared. The downward line in the “K” represents all other sectors with the hardest hit being:

  • Industrials (e.g. Caterpillar, Boeing, Lockheed Martin, General Electric),
  • Financials (e.g. Bank of Nova Scotia, JP Morgan Chase),
  • Energy (e.g. Suncor, Canadian Natural Resources)

Most importantly, what the following diagram illustrates is that there are opportunities – not necessarily in what’s currently booming, and maybe not yet in the sectors that are struggling most, but those diamonds in the rough – individual companies or sectors that are priced attractively and ready for growth.

Your Next Step…

It’s time to be really very clear on what you own, to understand the unusual risks of the pandemic and its economic consequences, as well as the unusual investment opportunities it is presenting. Understand your current position, rebalance and diversify as warranted. The future is bright on the other side of the pandemic. We just need to proceed wisely.


The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

Shape of the economic recovery and what’s next for investors

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Results from April 21, 2020 survey. Click image to enlarge.

Last month we asked you to participate in our survey on the Shape of the Recovery. Thanks for taking the time to give us your prediction. The results are displayed in the bar chart to the right. You look like experts!

For months before Covid-19 hit, valuations and earnings expectations were getting very high. By the end of December 2019 many portfolio managers had become more defensive, increasing their allocations to more conservative assets. Then Covid-19 arrived, triggering a global recession.

L-Shaped Recovery

From their enthusiastic highs in mid-February 2020, global equity markets plunged and by March 23 had declined over 30 percent in some markets including the TSX. The massive selloff and liquidity crunch in March also affected fixed income. Bond markets were totally chaotic. The reality of a global pandemic had registered! During this period the price of oil collapsed, with Saudi Arabia and Russia clashing over production quotas. At that point, the markets were pricing in a dire scenario with an L-shaped recovery – basically a recessionary collapse with little economic activity expected for the next 12 to 18 months.

U-Shaped Recovery

As the indiscriminate panic selling subsided, the equity markets started to stabilize and move off the March lows. Share prices for the top ten technology companies surged. Many of the remaining stock prices oscillated, in some cases declining again to retest their March lows. Supported by unparalleled central bank interventions and government relief programs, by the end of April it seemed that the markets were pricing in more of a U-shaped recovery.

V, W or Square Root-Shaped Recovery

There is still hope for the best-case scenario, the V-shaped recovery. Sentiment rises on reports of successful vaccine research and then recedes quickly with announcements of bankruptcies and escalating US-China trade tensions. Some are hopeful but question the near-term sustainability of the April gains in equities and believe the recovery will take the shape of a W. (I’m in that camp.) Others see a recovery followed by a period of slow growth, in the shape of the square root symbol. Still many unknown unknowns!

Swoosh-Shaped Recovery

Although opinions vary widely as the story unfolds, the predominant view is that the recovery will take the path of the Nike swoosh. Canadian economist David Rosenberg pictures it as a Swoosh interspersed with numerous small Ws along the way. He is suggesting the economic recovery will be slow, marked by frequent periods of high volatility. (His nickname is “Rosie”, but his predictions rarely are!) His timeframe for recovery is at least one year, maybe 2. He expects low interest rates and deflation for the next two years followed by inflation, noting that in the Great Depression inflation rose to 5%.

Whatever the time frame for the recovery, there are reasons to be optimistic. Economies are reopening and with each day there is more clarity regarding the nature of the virus and the depth and severity of the recession. The narrative in the media is turning from the virus to speculation about the new normal – what will it look like and what will really change. No one knows yet. Trends underway before Covid-19 are likely to continue but at a more rapid pace and with some new and unexpected twists. For the markets there is an estimated $4.7 trillion USD in cash on the sidelines. When this cash is invested, it will propel equity prices higher.

Factor-Based Investing

Last fall as we explored “Investing for the Next Decade” we looked at the factors that contribute to investment success. These factors provide guidance as we review portfolios and strive to maintain the right balance between preservation and growth of capital. At this point in the economic cycle we are seeing signs of the move out of the current recession into a new economic cycle. The factors shown below help us to frame the discussion.

Click image to enlarge.

Typically leading us out of a recession and back to more robust growth are the smaller, value-oriented companies. In the current environment it will also be the high-quality companies that have the resources to grow their business through the acquisition of competitors or complementary businesses.

What’s the next step?

In a recent interview Thomas Caldwell, Founder of Caldwell Securities, noted that “there is no news, only opinions” about the future, and investors need to quell their emotions and always view the present as an opportunity. We do not yet know the real depth or severity of the economic damage, but opportunities do exist. It’s time to look again at how your portfolio is positioned to meet your needs and objectives.

Click to enlarge image.

With the above factors in mind, think about how you want your portfolio to be positioned 2-5 years out and start to move in that direction now. Particularly during times of uncertainty it is beneficial to apply the barbell approach – strike an appropriate balance between defensive and offensive assets. We don’t know what life after lockdowns will bring, but with interest rates close to zero you’ll need to see some growth in your portfolio to achieve your life vision and sustain the lifestyle you desire. Don’t allow fear to get in the way of a bright future.


In my next blog I’ll be providing an update on different sectors and how you can use ETFs for sector-specific investing. Until then, stay safe and continue to do your part flattening the curve.


The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

What do you think economic recovery will look like post-Covid?

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The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

Dollar-Cost Averaging – A Strategy that Works

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Opportunity always accompanies a crisis. If you are investing on a monthly basis and have a secure cash flow throughout this pandemic, then consider temporarily increasing your contributions. It’s easy, all it takes is a phone call to authorize the change.

The tables below show why this is a powerful way to build wealth.

Market Falling

If you invest $100 each month when prices are falling, you buy more units/shares. In the example below, it may not have been emotionally rewarding to buy at $6.50 per unit (month 12) as compared to $10.00 per unit (month 1). For a long-term investor, there is a significant difference in growth on 15.38 shares compared to the 10.00 you received for your $100 in month 1.

Table and chart illustrating impact of dollar-cost averaging. When the market is falling more units/shares can be purchased at a lower price.


Market Rising

Table and chart illustrating impact of dollar-cost averaging. When the market is rising fewer units/shares are purchased at a higher price.


Market Fluctuating

Table and chart illustrating impact of dollar-cost averaging. When the market is fluctuating units/shares are purchased at different prices..


Side by Side Comparison

The comparison below demonstrates clearly that dollar-cost averaging is a successful strategy in all types of markets but the most beneficial is purchasing when prices are dropping.

The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.

Blame it on the coronavirus

Posted on:

Well, it’s been quite a week in the financial markets! I’m writing this Friday afternoon before the close of trading but it appears as if it’s another day of panic.

In 2019 the prices that investors were willing to pay for shares (ownership in a company) continued to rise at an above-average clip. At the same time, the earnings (profits) that the companies were reporting were not showing the same growth. The rise in stock prices was disconnected from what investors could expect to receive as their share in the profits (dividends).

In 2020, this DISCONNECT, the spread between the price per share and the profits, continued to widen… until the potential economic impact of the coronavirus sent investors into a panic. I believe that if it hadn’t been the coronavirus, it would have been some other trigger.

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When this has happened in the past, my approach has been to look for opportunities to improve our clients’ portfolios. In 1987, when I was just starting in finance, I observed the 23% one-day drop in the primary Industrial Index, the Dow Jones. Since then, there have been numerous opportunities to watch investor psychology in action.

Things to keep in mind:

  • It’s usually best to stay invested
  • Diversification doesn’t necessarily prevent short-term declines but it does stabilize your portfolio
  • When fear is at its peak in the financial markets you can be strategic and use the opportunity to strengthen your investment portfolio

On our agenda for the next few days/weeks:

  • Looking for ways to reallocate tax-efficiently by transferring in-kind from Non-Registered cash accounts into Tax-Free Savings Accounts (TFSAs)
  • Looking for ways to reallocate tax-efficiently by transferring cash from RIF/LIF accounts into Tax-Free Savings Accounts (TFSAs)
  • Investing cash currently held within accounts
  • Reviewing source of monthly withdrawals for retirement income payments

On days like this, history can offer some helpful reminders.

The source for the following is PlanPlus Global using as an example a portfolio that is allocated 30% defensive (cash and fixed income) to 70% growth (equities), for the period January 1, 1973, to December 31, 2019,

There were a total of 73 rises but 79% of these, 58 in all, were less than 10%.

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There were 72 falls of one month or longer but nearly all were less than 10% and about two-thirds of these lasted only a month.

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The information in this commentary is for informational purposes only and not meant to be personalized investment advice. The content has been prepared by Jan Fraser, Fraser & Partners Investment Services of Aligned Capital Partners Inc. (ACPI) from sources believed to be accurate. The opinions expressed are those of the author and do not necessarily represent those of ACPI.