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Q3 2019 - Investment Update

Market Update

Once again global markets were led by North America in the third Quarter. Most countries struggled to keep up with Canada and the United States which squeaked out 1.69% and 1.19% growth respectively.

Several economic indicators in Canada and the US – such as wage and employment growth, and consumer spending – remain strong. However, cracks are appearing in the manufacturing sector and investors began to rotate away from growth sectors in Q3 in anticipation of a slow-down in consumer behaviour.

The Global economy is currently subject to two main opposing forces: the weight of trade uncertainties, and the support of low interest rates. While the former has driven up the cost of producing goods, the latter seeks to compensate the consumer and incentivize companies to keep up production.

Meanwhile as Canadians are getting ready to head to the polls on October 21st, the political situation with our neighbours to the south is in a great deal of flux. The Democratic house of representatives has launched an official impeachment inquiry into the conduct of President Trump, putting the President’s approval rating will under pressure. Interestingly, no US president has ever been removed from office through impeachment. Richard Nixon resigned, and both Bill Clinton and Andrew Johnson were impeached by the house but not the Senate. Amongst those cases no discernable pattern in stock markets emerged. On the other hand, it has been also been uncommon for a President to be re-elected during a period of economic contraction. While Democrats push for impeachment, all eyes will be on trade negotiations with China as Donald Trump hopes keep the Economy feather in his cap.

Our Response

We are not presently concerned that a recession is imminent, however our outlook has shifted from “cautiously optimistic” to just plain “cautious”.

Towards the end of the quarter higher growth sectors, such as Technology and Health Care, experienced sharper sell-offs as investors began rotating into better valued or defensive positions. Likewise, we have begun to reduce exposure in some of these areas and continue to introduce private alternative assets. This Pension-style approach to asset management provides reliable tax efficient growth during times of both equity and fixed income volatility.

Our primary blue chip stocks showed strong results again this Quarter, with 3/5 returning positive results and collectively outperforming the S&P500 by 22.92% on a Pre-Dividend basis.

The Rockridge Private Debt Pool has been consistent month after month, posting a 1 Year return of 6.95% as of August 31st.

Using a similar multi-manager approach, our product team launched the Forsyth Real Estate Pool at the end of September. Forsyth combines the strength and track record of 9 separate asset managers, focusing on Multi-Family and Commercial Real Estate projects in Canada and the United States. The pool will target an annual return of 8-10%, with a Tax-Free Return of Capital yield of 4-6% annually.

On a Risk vs Return basis, it is easy to see why Pension funds Globally have been flocking towards alternative assets for several years. We are thrilled to be able to bring this traditionally restricted asset class to the retail investor – and in particular to Harbourfront clients only.

As always, we thank you for your continued support and look forward to speaking with you in the future.

-The Gilman Deters Private Wealth 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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Q4 2019 - Investment Update