Christine Poole, CEO and managing director at GlobeInvest Capital Management

Focus: North American large cap stocks

MARKET OUTLOOK:

The timely rollout of vaccinations in the United States means the economy is reopening at a faster pace than originally anticipated just a few months ago. This is a welcome development. While many other countries have lagged in their respective rollouts, as supply availability increases and vaccine rates rise, a more synchronized global recovery will unfold.

The material uptick in inflation recently to levels not seen in many years is concerning, however it is the sustainability of elevated inflation that will ultimately influence monetary policy. The U.S. Federal Reserve expects higher inflation in the near-term due to year-over-year comparisons from a trough base as well as supply chain bottlenecks coinciding with a rebound in demand for goods and services as economic activity normalizes. Over the longer-term, the dual influence of waning pent-up demand combined with a restocking of inventories will eventually alleviate shortages and dampen upward price pressures.   

A possible reacceleration in wages could also push the inflation rate higher. However, the U.S. labour market remains subpar with the unemployment rate at 6.1 per cent and labour participation rate at 61.7 per cent. Following the surprisingly weak hiring data, some Republican-led states are moving to reject the enhanced $300 per week federal pandemic unemployment payment set to expire in September on the belief that the supplement represents a disincentive to return to work. Should higher wage growth materialize, an offset could be stronger growth in labour productivity.  

Volatility will continue to prevail in financial markets until there is more visibility on the durability of rising inflation. Notwithstanding, strengthening corporate profits is a tailwind for equites and pullbacks are opportunities to invest in financially sound, well-positioned companies.

TOP PICKS:

Abbott Laboratories (ABT NYSE) recent purchase $118.50 range in May 2021  

Abbott is a diversified global healthcare company operating in four segments: Diagnostics, established pharmaceuticals, medical devices, and nutrition. Its products are sold in over 160 countries with about 60 per cent of sales from developed markets and 40 per cent of sales from emerging markets. Abbott has increased its dividend for 49 consecutive years and offers a dividend yield of 1.5 per cent.

Aritzia (ATZ TSX) recent purchase price $29.85 range in May 2021

Aritzia operates in the women’s apparel industry, offering a strategic mix of exclusive in-house brands at attainable price points that appeals to a wide demographic. With only just 101 boutiques in North America, Aritzia has strong unit growth potential especially in the U.S.  Other sources of future growth include expansion into new categories and broadening existing product lines. Aritzia also continues to enhance its e-commerce and omni-channel capabilities to support its online business.

Zoetis (ZTS NYSE) recent purchase price $169 range in May 2021

Zoetis is a global leader in the animal health industry offering therapeutics for companion animals (55 per cent of revenues) and livestock (45 per cent of revenues). Operations outside of the United States account for 46 per cent of revenues, including 21 per cent in emerging markets. The company has a diverse, durable, and innovative portfolio with about 300 product lines across eight animal species and within seven major product categories.  Zoetis provides a dividend yield of 0.6 per cent.

PAST PICKS: May 13, 2020

Algonquin Power (AQN TSX) 

• Then: $18.58
• Now: $18.30
• Return: -2%
• Total Return: +3%

Mondelez International (MDLZ NASD)

• Then: $49.56
• Now: $62.63
• Return: 26%
• Total Return: 29%

Otis Worldwide (OTIS NYSE)

• Then: $48.21
• Now: $79.05
• Return: 64%
• Total Return: 66%

Total Return Average: +33%

Twitter Handle: @christine_globe

Company Website: www.globe-invest.com