Christine Poole, CEO and managing director at GlobeInvest Capital Management
Focus: North American large caps

MARKET OUTLOOK

Equity markets are recalibrating to the prospect of sustainable higher U.S. interest rates, driven by a buoyant U.S. economy and central bank commentary alluding to a continuation of rate increases. Neither driver is that surprising, so the ensuing market pullback could partly be attributed to a much needed pause after the strong run in the last quarter for U.S. stocks.

More recently, the U.S. Treasury yield curve has shifted up and steepened, albeit moderately, with the spread between the 10-year and 2-year now at 32 basis points. The steepening is encouraging, given that with inflation expectations in check, the Fed intends to continue gradually raising interest rates.

Low unemployment and higher wages are supportive of continued U.S. consumer spending, which accounts for two-thirds of U.S. GDP. Both consumer and small business sentiment remain at elevated levels, boding well for future economic activity.

The consensus expectation is for third quarter earnings per share (EPS) for the S&P 500 companies to be up over 20 per cent year-over-year. Excluding the beneficial impact of lower corporate taxes, underlying EPS growth is estimated to be 12 per cent. Tariffs, elevated input costs, a stronger U.S. dollar and softening economic growth in regions outside of the U.S. are potential headwinds. Commentary to the extent these factors may dampen future profit growth will be closely monitored.

TOP PICKS

NUTRIEN (NTR.TO)
Recent purchase at the $74.70 range in September.

Formed through the merger of Agrium and Potash, Nutrien is the world’s largest fertilizer producer and retailer of crop inputs and services to farmers. Synergy realizations are running ahead of its original timeline. Proceeds from announced asset sales will provide cash flow for a stock repurchase, higher dividends and the global expansion of Nutrien’s agricultural retail network. Nutrien offers a dividend of 2.8 per cent.

BROOKFIELD ASSET MANAGEMENT (BAMa.TO)
Recent purchase price at the $55.50 range in September.

Brookfield Asset Management 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 1.4 per cent.

ALPHABET (GOOGL.O)
Recent purchase price at the $1,180 range in September.

Alphabet is a global technology company, providing the world’s leading search engine, Google. It dominates in both global desktop and mobile search engine queries. Google benefits from the secular shift to online advertising, which garners about 35 per cent of global advertising budgets and will continue to grow. Other growth areas include Google Cloud, Waymo and YouTube.

PAST PICKS: OCT. 10, 2017

JOHNSON & JOHNSON (JNJ.N)

• Then: $133.90
• Now: $137.73
• Return: 3%
• Total return: 6%

MONDELEZ (MDLZ.O)

• Then: $41.45
• Now: $42.27
• Return: 2%
• Total return: 4%

PEMBINA PIPELINE (PPL.TO)

• Then: $42.73
• Now: $44.11
• Return: 3%
• Total return: 9%

Total return average: 6%

TWITTER: @christine_globe
WEBSITE: www.globe-invest.com