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Q2 2020 - Investment Update

After experiencing a massive market shock in February and March, global stock markets responded much more quickly than most asset managers anticipated in Q2. The unquestionable driving factor behind this rally was massive financial stimulus from central banks and governments alike. As the pandemic driven shut-down of the economy wore on however, the stock market quickly disconnected from fundamental data and a steep rally continued through the end of May. One popular thesis for this divergence is the rapid emergence of the do-it-yourself investor. Financial institutions across North America have reported a record number of brokerage accounts being opened during the first 6 months of 2020. Early reports suggest that the millennial generation has been the dominant group behind this phenomenon due to the popularization of phone-based stock trading applications. Without sports and other forms of entertainment on TV, millennials (and older generations as well) have flocked to stock trading for entertainment.

In one egregious example this quarter, “investors” flooded into Hertz’ stock shortly after the company had announced its bankruptcy. The company contemplated a first-ever “Initial Bankruptcy Offering” or IBO. Not to be confused with an IPO, this offering was aimed at raising capital to pay off creditors. The prospectus for the IBO said explicitly that stock investors were not likely to see their investment returned. In the subsequent days, the stock soared by over 600% before crashing back to earth. This type of speculative behaviour should be concerning to long term investors for obvious reasons.

Overall in Q2, we continued to maintain a fairly defensive posture while adding to some of our existing positions and initiating a new position in Gold. Our momentum strategy, the Willoughby Investment Pool, reacted aggressively to identify companies that would benefit from the Pandemic and those that would suffer. Technology stocks, like Microsoft, NVIDIA, Netflix, Google, Apple, and Activision Blizzard were leaders before the Pandemic and recovered quickly to achieve new all-time highs.

Additional prospective companies have landed on our radar and we are eager to see what we can learn from the first real COVID earnings season, which is now upon us. Meanwhile, we will continue to hold investments in private debt and private real estate, that provide strong, consistent, risk-adjusted returns while increasing our weight to great companies that can perform well in the current environment. This leaves your portfolios well balanced, with the ability to generate wealth in both great markets and markets of uncertainty.

Have a fantastic summer.

-The Gilman Deters Team

I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of Harbourfront Wealth Management. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by HarbourfrontWealth Management Inc.”

This information transmitted is intended to provide general guidance on matters of interest for the personal use of the reader who accepts full responsibility for its use and is not to be considered a definitive analysis of the law and factual situation of any particular individual or entity. As such, it should not be used as a substitute for consultation with a professional accounting, tax, legal or other professional advisor. Laws and regulations are continually changing, and their application and impact can vary widely based on the specific facts involved and will vary based on the particular situation of an individual or entity. Prior to making any decision or taking any action, you should consult with a professional advisor. The information is provided with the understanding that Harbourfront Wealth Management is not herein engaged in rendering legal, accounting, tax or other professional advice. While we have made every attempt to ensure the information contained in this document is reliable, Harbourfront Wealth Management is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is,” with no guarantee of completeness, accuracy, timeliness or as to the outcome to be obtained from the use of this information, and is without warranty of any kind, express or implied. The opinions expressed herein do not necessarily reflect those of Harbourfront Wealth Management Inc. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are not to be construed as a solicitation or offer to buy or sell any securities mentioned herein. Harbourfront or any of its connected or related parties may act as financial advisor or fiscal agent for certain companies mentioned herein and may receive remuneration for its services. The comments and information pertaining to any investment products (The Portfolios) sponsored by Willoughby Asset Management are not to be construed as a public offering of securities in any jurisdiction of Canada. The offering of units of The Portfolios is made pursuant to the Offering Memorandum or Simplified Prospectus and only to investors in Canadian jurisdictions. Important information about The Portfolios is contained in the Offering Memorandum or Simplified Prospectus available through Willoughby Asset Management. Commissions, trailing commissions, management fees, performance fees and expenses all may be associated with investments in The Portfolios. Investments in The Portfolios are not guaranteed, their values change frequently, and past performance may not be repeated. Historical annual compounded total returns including changes in unit value and reinvestment of all distributions do not take into account sales, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Unit values and investment returns will fluctuate and there is no assurance that The Portfolios can maintain a specific net asset value. Harbourfront Wealth Management Inc. (“Harbourfront”) has relationships with related and /or connected issuers, which may include the securities or funds discussed in this commentary and are disclosed in our Statement of Policies Regarding Related and Connected Issuers. This policy is included in your new client package, on our website, or can be obtained from your investment advisor on request.

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Q1 2020 - Investment Update