David Driscoll, president and CEO of Liberty International Investment Management Inc
FOCUS: Global equities



In just over three weeks of market action, we’ve seen:

  • The S&P 500 Index up 7.45 per cent. According to the Stock Traders’ Almanac, how January goes, so goes the year. This would imply that we have positive returns on the stock market in 2018.
  • Stock-based funds overall have brought in just shy of $77 billion in 2018 with the lion's share of $59.2 billion going to passively focused exchange-traded funds. By comparison, equity funds across all classes took in a net $278 billion for all of 2017 according to Morningstar, meaning that last week alone equated to 12 per cent of flows for the entire previous year.
  • Bank of America Merrill Lynch's "Bull & Bear" indicator is sending a sell sign, which has been accurate 11 straight times since the firm started tracking it in 2002. The indicator points to a technical pullback for the S&P 500 to 2,686, which would be about a six-per-cent drop from the current level.
  • Thanks to U.S. tax cuts, American companies are thinking of closing down or selling Canadian assets and taking the cash back to the U.S. to re-invest there as the corporate tax rate is now lower than Canada’s (21 per cent vs.30 per cent).
  • Bond prices have fallen 1.8 per cent on the Government of Canada 10-year bond. For the 10-year U.S. Treasury, its price has fallen 2.1 per cent. 
  • And thanks to a falling U.S. dollar, commodity prices (priced in U.S. dollars) have jumped across the board except for coffee and sugar. Natural gas prices are up 18 per cent, West Texas Crude (WTI) is up 9.5 per cent and agriculture prices are up two to three per cent for corn, wheat and soybeans.

So, what to make of all this? Do we continue to melt up to 3,700 on the S&P 500 (the equivalent of the market peaks in 1929 or 1999) or, as speculated above, suffer a six-per-cent correction and then continue higher?
With stocks at high historical nose-bleed levels investors have to seriously consider how much they can afford to lose and decide on how much to invest in each instrument, whether or not they're stocks, ETFs, bonds, cash, etc.
When buying a stock, you should always ask yourself these questions:

  1. Why am I buying the stock? You should have at least five reasons why you wish to own the company. Otherwise, don’t buy it.
  2. How does it fit in my portfolio? Avoid the most common mistake investors make: correlation risk. One company from a particular sector only.
  3. What are the risks? The risks should be well understood and each company’s risks should be different than other names in an investor’s portfolio.
  4. How much cash do I wish to own in the event this market sells off more than six per cent?
  5. At what point do you wish to enter the market again? After a 10 per cent, 20 per cent or 50 per cent correction? That discipline can help you avoid buying too soon and force you to think about entry prices on stocks you wish to own or add to a position.
  6. Are your dividends growing and at what rate? Is it greater than the historical norm of seven per cent? Is the growth rate offsetting inflation?

If you can answer these and prepare ahead of time, you’ll be ready for whatever comes our way.



Stantec offers professional consulting services to both public and private-sector clients for all phases of a project’s life-cycle. Services include planning, architecture, interior design, landscape architecture, engineering, surveying, environmental remediation, project economics and project management. For example, Stantec has done interior design work for the expansion of the Edmonton International Airport Terminal, rehabilitated sewer lines in Boston and brought solar and wind power to the Brooklyn Navy yard.
Its latest acquisitions have provided them with more U.S. exposure, mostly in the environmental sector. If U.S. President Trump encourages the passing of an infrastructure bill in 2018, Stantec should benefit from it. Last purchase was January 26, 2018 at $35.39.


Svenka Handelsbanken provides corporate and individual clients with deposit products, loans, credit cards and other banking services. The bank boasts more than 830 branches in 25 countries, with most in Sweden, the U.K., Denmark, Finland, Norway and the Netherlands. Founded in 1871, the bank’s assets now exceed $360 billion (as a comparison, RBC’s assets exceed $1.2 trillion).
We like the bank for its customer-centric business and its business model: branch managers make the lending and deposit decisions, not the head office. Branch banking is more profitable and stable than capital market activities. Its Tier 1 capital ratio is 27.9 per cent, making it less risky than other European banks. Loan growth in 2017 was 5.2 per cent, while deposit growth was 10 per cent. Finally, the dividend has grown nicely, averaging 10 per cent a year for the past 15 years. Last purchase was January 29, 2018 at $116.32

U.S. TREASURY TIPS (TII 2.125% due February 15, 2040)

This is an inflation-protected Treasury bond rated AAA. An investor receives 2.125 per cent in coupon payments plus the inflation rate each year. If inflation is running at 1.5 per cent, the investor receives 3.625 per cent in payments. If inflation runs to 10 per cent, the investor would be paid 12.125 per cent. The inflation rate compounds each year to maturity.
With a falling U.S. dollar and rising commodity prices, companies may be forced to raise prices for their goods. If wages start to rise because of a labour shortage, that too is inflationary. If Trump decides to run higher deficits and if a new $1-trillion infrastructure bill is enacted, they, too, are inflationary.
This investment is a hedge against inflation, naturally, but also against a falling U.S. dollar. Last purchase was January 19, 2018 at $147.12.





Danaher is a conglomerate focused on five areas: Life sciences, diagnostics, water quality, product ID and dental. Each has high barriers to entry. The company acquires firms and changes the business structure to reduce costs and increase margins, providing solid free cash flow growth which leads to higher annual dividends and, ultimately, a higher long-term share price. 

  • Then: $87.50
  • Now: $103.69
  • Return: 18.50%
  • Total return: 19.26%


Paychex Inc provides comprehensive payroll and integrated human resource and employee benefits outsourcing solutions for small-to-medium-sized businesses in the U.S. For every quarter-per-cent increase in rates, the company makes $3 million or $0.01 a share in profits just by investing the float set for remittance to the IRS from payroll taxes. The recent corporate tax cut from 35 per cent to 21 per cent should provide Paychex with ample cash to continue raising its dividend aggressively.

  • Then: $62.56
  • Now: $68.83
  • Return: 10.02%
  • Total return: 12.73%


The company provides a variety of computer-aided design, manufacturing, engineering and product life-cycle management (PLM) software that firms use to create, model and test designs. From original idea to finished product, Dassault’s software is the creative tool. Recent acquisitions have included firms with artificial intelligence experience to further improve the design experience for their clients. 

  • Then: 76.81 euros
  • Now: 92.80 euros
  • Return: 20.81%
  • Total return: 21.59%