Full episode: Market Call for Tuesday, May 14, 2019
Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps
The unexpected escalation in the U.S.-China trade war has rattled stock markets, putting downside risk to economic growth prospects. With higher tariffs in place and the potential expansion of tariffs to all Chinese imports, concerns of short-term inflationary pressures are resurfacing. For now, inflation remains contained, providing the U.S. Federal Reserve leeway to keep interest rates increases on hold. The longer-term impact of tariffs is negative for global economic growth and, by default, corporate profits.
Geopolitical uncertainty is by nature unpredictable and difficult to forecast. The strong rebound in stock markets from the December lows was driven in part by a consensus view that trade concerns would be abating. Therefore, the ensuing pullback when this did not unfold should not be surprising. Other catalysts that buoyed stocks included better-than-expected first quarter corporate profits and supportive economic data/indicators.
While it is arguably in the best interests of both the U.S. and China to avoid a full-blown trade war, it is also highly unlikely the two countries can resolve all trade issues in one negotiated agreement. We continue to monitor developments and the extent global economies are affected.
Our discipline remains to invest in financially sound, growing dividend income stocks and well-positioned companies in secular growth industries at attractive prices.
PEMBINA PIPELINE (PPL.TO)
Recently purchased around $47.40 in May 2019.
Pembina is a diversified energy infrastructure company that operates pipelines, natural gas gathering amd processing facilities and midstream businesses. The company is well-positioned in the prolific Montney and Duvernay shale regions, with secured projects in place to support its future cash flow growth over the foreseeable future. Pembina offers an attractive 5-per-cent dividend yield.
ABBOTT LABS (ABT.N)
Recently purchased around $76.20 in May 2019.
Abbott is a diversified global healthcare company operating in four segments: established pharmaceuticals (15 per cent of sales), diagnostics (24 per cent), nutritionals (24 per cent) and medical devices (37 per cent). Its products are sold in over 150 countries with 65 per cent of sales outside of U.S. and 42 per cent of sales coming from emerging markets. Abbott offers an attractive dividend yield of 1.7 per cent and has raised its dividend for 47 consecutive years.
Recently purchased around $123 in May 2019
Microsoft is global technology company providing software products, support, services and devices. Its business segments include productivity and business tools, intelligent cloud and more personal computing.Microsoft is well positioned to participate in the corporate adoption and utilization of cloud technology. Its growing recurring revenue stream and strong balance are also appealing investment attributes. Microsoft’s dividend yield is 1.5 per cent.
PAST PICKS: MAY 8, 2018
BROOKFIELD ASSET MANAGEMENT (BAMa.TO)
- Then: $51.30
- Now: $64.08
- Return: 25%
- Total return: 27%
TD BANK (TD.TO)
- Then: $73.53
- Now: $73.86
- Return: 0.4%
- Total return: 4%
UNITED TECHNOLOGIES (UTX.N)
- Then: $121.79
- Now: $133.88
- Return: 10%
- Total return: 12%
Total return average: 14%