Michael Hakes, Senior Portfolio Manager, Murray Wealth Group
Focus: Global equities
Top Picks: GO Residential REIT, Microsoft, 3i Group Plc
MARKET OUTLOOK:
Market expectations have shifted meaningfully, with investors increasingly pricing in additional rate hikes before year-end. This reflects lingering inflation concerns, evolving policy dynamics—including the growing influence of more hawkish voices—and a perception that economic resilience may require further tightening.
We think the U.S. Federal Reserve should remain on hold, as underlying growth, inflation, and labor trends point to continued moderation rather than reacceleration.
Economic momentum is slowing. Real consumer spending grew at roughly a 1.2 per cent annualized pace in the first half, while second-quarter gross domestic product (GDP) expectations have edged lower, with softness most evident in services—suggesting restrictive policy is gaining traction.
At the same time, inflation is easing more convincingly than markets imply. Monthly core consumer price index (CPI) and personal consumption expenditures (PCE) readings are expected to trend at or below 0.2 per cent, supported by fading tariff effects, normalization in goods pricing, and declining energy costs. The end of the recent geopolitical conflict has driven a meaningful pullback in oil and gasoline prices, reinforcing the disinflationary backdrop.
The labour market also shows signs of cooling. Payroll growth is expected to slow materially, while unemployment remains stable in the low four per cent range—consistent with easing wage pressure rather than renewed overheating.
Financial conditions have tightened modestly through higher yields, though resilient equity markets continue to provide support.
In this context, markets may be overestimating the likelihood of further hikes. The combination of moderating growth, easing inflation, and a cooling labour market supports an extended pause, despite a more hawkish tilt in policy discourse.
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TOP PICKS:
GO Residential REIT (GO.U TSX)
GO Residential REIT is a newly listed multifamily real estate investment trust (REIT) focused on luxury high-rise residential properties in New York City. It offers an attractive approximately 6.8 per cent forward yield, supported by stable and growing cash flows.
The company trades at a significant discount to its NAV. The REIT’s reported net asset value (NAV) is approximately $23.70 per unit, while the stock has recently traded near approximately $9.95, implying an around 58 per cent discount. This gap is materially wider than U.S. multifamily peers, which trade at meaningfully higher multiples.
Fundamentally, the portfolio is well insulated from regulatory risk. Most units are free-market or positioned above regulated rent thresholds, limiting exposure to rent control measures. At the same time, supportive policy changes, including a ~20% reduction in insurance costs, provide direct margin benefits.
Market dynamics remain highly favourable. NYC rental demand is near peak levels, with vacancy below one per cent. Elevated interest rates continue to drive “renter-by-choice” behaviour, while incremental taxes on secondary residences are pushing marginal buyers into the rental market. This has translated into strong rent growth, with renewals and new leases increasing approximately 10 to 12 per cent.
Growth is being executed conservatively. Management has expanded the portfolio from five to to nine properties through acquisitions at or below NAV, avoiding shareholder dilution and capitalizing on distressed sellers.
Key catalysts include a planned U.S. listing in late 2026 and continued insider buying, both of which should help close the substantial discount to intrinsic value.
Microsoft (MSFT NASDAQ)
Microsoft is high-quality compounder with three durable engines: Azure, enterprise software, and artificial intelligence (AI) monetization. The bull case is that Microsoft can keep turning its installed base into higher-value subscriptions and usage-based revenue while preserving margins and cash generation.
Azure remains the clearest growth lever. Enterprises are standardizing more workloads on Microsoft’s cloud because it bundles infrastructure, security, identity, data tools, and productivity software in one stack, which raises switching costs and supports pricing power. That gives Microsoft an advantage not just in growth, but in stickiness.
AI is the second major driver. Microsoft is spending heavily on data centres and AI infrastructure. That spending is aimed at monetizing Copilot, Azure AI services, and broader enterprise. If AI adoption stays broad, Microsoft is well positioned to capture value across the full stack.
Microsoft is very attractively valued at current levels.
3i Group Plc (III LON)
3i Group plc is a London-based investment company focused with private equity holdings.
3i Group stock has been weak since Nov 2025 as its majority owned Action stores posted a slowdown in sales in Europe, specifically in France (25 per cent of sales).
Action is fast-growing, European discount retailer with a long runway for store expansion. Action has more than 3,000 stores across 13 countries and still has roughly 4,850 potential new stores across existing and new European markets. So, they can double their store base. They are opening new stores at roughly 11 per cent per year.
The Action business model combines very low prices, rapid inventory turnover, and a disciplined supply chain with two-thirds of assortment changing frequently, which keeps the concept fresh and supports traffic. Action has delivered years of strong topline and earnings before interest, taxes, depreciation, and amortization (EBITDA) growth, while continuing to open stores at a rapid pace and improve distribution capacity.
We think the current valuation is very attractive when compared against Dollarama, Dollar Tree, Walmart, Costco and other well-established retailers.
3i Group will recover over the next 18 months and offers good upside from here.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GO.U TSX | N | N | Y |
| MSFT NASDAQ | N | N | Y |
| III LON | N | N | Y |
PAST PICKS: DEC. 1, 2025
UnitedHealth (UNH NYSE)
Then: US$323.21
Now: US$425.36
Return: 32%
Total Return: 34%
Lululemon (LULU NASDAQ)
Then: US$182.41
Now: US$118.43
Return: -35%
Total Return: -35%
Kneat.com (KSI TSX)
Then: $4.58
Now: $6.49
Return: 42%
Total Return: 42%
Total Return Average: 14%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| UNH NYSE | N | N | Y |
| LULU NASDAQ | N | N | Y |
| KSI TSX | N | N | Y |
