Full episode: Market Call for Tuesday, June 11, 2019
Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
Stock markets have basically done a round trip since last fall. U.S. tariffs on imports from its largest trading partners combined with a less accommodative U.S. Fed policy first drove equities down through December. The subsequent recovery to new highs in the first four months of this year was driven by rising optimism on a resolution in the U.S.-China trade war and the Fed pivot to a dovish stance, putting further rate increases on hold. The abrupt pullback from the April highs reflected escalating trade tensions resulting in a second round of tariffs on certain Chinese imports as well as Trump’s unexpected announcement of tariffs on all Mexican imports, the latter now resolved.
Trade uncertainty continues to be the largest risk for equities. Investors have been assuaged by Fed Chair Jerome Powell’s recent suggestion that he is prepared to act should trade-related disruptions weigh on growth. Muted inflationary pressures provide him the capacity to react accordingly.
Economic data and indicators point to slower growth in most regions around the world. While monetary policy by central banks have become a tailwind for equities, the prospect of a prolonged and more pronounced trade war remains a significant headwind for continued economic and profit growth. Within the U.S., the divergence between the manufacturing and much larger service sector is persisting.
We remain patient for opportunities to invest in financially sound, growing dividend income stocks and well-positioned companies in secular growth industries at attractive prices.
Alphabet is a global technology company and owner of the world’s leading search engine, which dominates in both global desktop and mobile search engine queries. Google benefits from the ongoing secular shift to online advertising. Other future growth areas include Google Cloud, Waymo and YouTube.
BROOKFIELD ASSET MANAGEMENT (BAMa.TO)
Brookfield is a global alternative asset manager with approximately $300 billion in assets under management. The company owns and operates assets on behalf of shareholders and clients with a focus on property, renewables, infrastructure and private equity. Brookfield seeks to invest in long-life, physical assets that typically benefit from some form of barrier to entry, regulatory regime or competitive advantages that provide for relatively stable cash flow streams. The stock offers a modest dividend yield of 1.3 per cent.
TD BANK (TD.TO)
TD is a leading North American bank, deriving 56 per cent of its net income from Canadian retail operations, 38 per cent from U.S. retail and 6 per cent from wholesale/capital markets. A strong capital position and a track record of consistent dividend growth (11 per cent annualized over the last 20 years) combined with attractive valuation metrics makes TD a timely investment for investors seeking income and moderate capital appreciation. Its dividend payout ratio of 43 per cent is at the lower end of its 40 to 50 per cent target range. TD’s current dividend yield is 3.9 per cent.
PAST PICKS: JUNE 8, 2018
- Then: $40.76
- Now: $51.50
- Return: 26%
- Total return: 31%
ROYAL BANK (RY.TO)
- Then: $99.89
- Now: $103.52
- Return: 4%
- Total return: 8%
JPMORGAN CHASE (JPM.N)
- Then: $111.11
- Now: $111.39
- Return: 0.5%
- Total return: 3%
Total return average: 14%