Christine Poole, President and Co-Chief Investment Officer, Davis Rea
Focus: North American large caps
Top Picks: Enbridge, Loblaw Companies Limited, Visa
MARKET OUTLOOK:
The conflict in Iran, investor concerns around artificial intelligence disruption and private credit have contributed to elevated volatility this year. Crude oil prices continue to trade well above pre-war levels and higher energy prices have fed quickly into prices at the pump, lifting headline inflation and eroding real income for households. The degree of economic impact will depend on the duration of the conflict and the normalization of oil flows through the Strait of Hormuz.
Monetary policy response to the oil price shock will also play a critical role. Although central bank rhetoric has shifted to a more hawkish tone, global policy rates are expected to remain broadly stable through the end of the year. With long-term inflation expectations still well-anchored, policymakers have some flexibility to look past the near-term surge in prices. Facing the dual pressures of rising inflation and slowing growth, central banks are signaling a cautious, wait-and-see approach as they assess the effects of this supply shock.
The U.S. economy entered 2026 with a significant tailwind from a major fiscal boost, the One Big Beautiful Bill Act (OBBBA), which cut taxes and produced consumer windfalls that many economists expected to support the consumer and growth during the year. That windfall, however, is likely to be offset by the energy shock from the conflict in the Middle East. Higher energy prices will eat up tax refunds, which is acting as a buffer to absorb the energy shock.
While far from a booming, the U.S. economy is still expanding with gross domestic product (GDP) growth around the two per cent range. The leading economic indicators that we track do not point to a pending recession in the United States. The Institute for Supply Management (ISM) Manufacturing Index expanded in April for the fourth consecutive month, and economic activity in the services sector also continued to expand, posting the 22nd consecutive month in expansion territory. Price pressures, however, escalated sharply and boosted the prices paid indexes of both surveys.
More importantly, the corporate profit outlook for the S&P 500 companies is positive. Earnings per share (EPS) is expected to be up 28 per cent in first quarter, and the growth rate to remain above 20 per cent for each subsequent quarter in 2026. For the year, EPS is estimated to be up 24 per cent and 15 per cent in 2027.
Our investment approach remains disciplined and focused on the long term, avoiding reactive decisions. The companies held in the fund are financially sound and profitable, with the resilience to navigate economic cycles.
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TOP PICKS:
Enbridge (ENB TSX)
Enbridge is a North American infrastructure company that owns and operates the world’s largest crude oil and liquids pipeline system, an extensive natural gas pipeline system, a large natural gas utility franchise and has a growing renewable energy portfolio. Enbridge’s low commercial risk model is anchored by 98 per cent of its cash flows underpinned by cost of service or take or pay contracts and 95 per cent by investment grade counterparties. Enbridge offers an appealing 5.3 per cent dividend yield and has increased its dividend for 31 consecutive years.
Loblaw Companies Limited (L TSX)
Loblaw is Canada’s largest food retailer offering consumers multiple banners and through Shoppers Drug Mart, the leading national drugstore operator. Its scale, extensive private label offering, assorted banners, and PC Optimum loyalty program are advantaged assets within a highly competitive industry. Loblaw provides a current yield of one per cent.
Visa (V NYSE)
Visa is a global payments technology company, operating the world’s largest retail electronic payments network and providing financial institutions with a broad range of platforms for consumer credit, debit, and prepaid payments. Visa benefits from the secular shift from cash/cheque to card-based and electronic digital payments. Visa is also a natural beneficiary in the growth of e-commerce/online retail spend. Visa offers a dividend yield of 0.8 per cent.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ENB TSX | Y | Y | Y |
| L TSX | Y | Y | Y |
| V NYSE | Y | Y | Y |
PAST PICKS: APRIL 21, 2025
CGI (GIB.A TSX)
Then: $144.33
Now: $86.84
Return: -40%
Total Return: -39%
JPMorgan (JPM NYSE)
Then: US$228.99
Now: US$298.10
Return: 30%
Total Return: 33%
RTX Corp (RTX NYSE)
Then: US$126.12
Now: US$177.56
Return: 41%
Total Return: 43%
Total Return Average: 12%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GIB.A TSX | Y | Y | Y |
| JPM NYSE | Y | Y | Y |
| RTX NYSE | Y | Y | Y |
