Last year was an emotional rollercoaster for stock and bond investors as both markets experienced significant volatility and negative returns. Russia’s Ukraine invasion, rising inflation, and recession fears dominated daily headlines.
Since October 13th global stock markets have rallied 11% on lower-than-expected September U.S. inflation numbers and expectations that central banks will slow the speed of future interest rate increases.
Last week, the U.S. Federal Reserve raised its overnight lending rate by 0.75% and signalled further rate hikes given the recent inflation rate of 8.3%. As a result, stock markets sold off back to their summer lows.
Like in the 1980s hit movie trilogy Back to the Future, investors have a huge sense of déjà vu. Inflation in Canada and the U.S. is back to 40-year highs, and as a result, central banks are quickly increasing interest rates as they worry about inflation getting entrenched. Central bankers wish they could jump into Doc’s DeLorean time machine and go back to early 2021 to slowly start raising rates rather than now being behind the curve. Meanwhile, governments wish they could use the DeLorean to go back and give out less money than they did during COVID.
During 2020 and 2021, technology companies benefited greatly from the COVID lockdowns as more people stayed or worked from home. Consumption of anything digital went through the roof, with technology companies reporting blockbuster earnings and surging stock prices. However, 2022 is a new environment.
Why does Matco believe that Vietnam is Asia’s next rising dragon?
Vietnam today has many similar features to China 20 years ago. Namely, the young educated population, strong work ethic, growing middle class, lower labour costs, substantial foreign direct investment, and a pro-growth government.
The name Molotov Cocktail was coined by the Finns in 1939 during the Winter War when Russian aircraft bombed Finland. Soviet foreign minister Vyacheslav Molotov would announce on Soviet radio that those bombing missions were humanitarian food deliveries for their starving neighbours. The Finns developed the handheld firebombs and threw them at Russian tanks as they rolled down the street. The Finns called it the Molotov Cocktail to go with the “food parcels” being delivered.
As the world watches the Russian invasion of Ukraine, investors have been hitting the panic button. Major global stock markets year-to-date are down in the range of 8-14%, while the TSX Composite Index is only down 1% given its large weight towards the resource (energy/metals) sectors.
The Canadian stock market continues to be seen as an unappreciated underdog due to its lack of sector diversification and heavy reliance on the resource sector. For many global investors, last year's 25% return came as a surprise. However, it wasn’t a surprise to Matco clients as we discussed at our 2021 Outlook how we believed that Canadian stocks would do well.
Matco clients are aware that our proprietary M-Factor process leads us to own companies that are compounders of capital over time, have a strong balance sheet, usually pay a dividend and most importantly are reasonably priced relative to expected earnings growth.
With the majority of second-quarter earnings reported in Canada, here’s a quick summary and highlights for the Matco Canadian Funds:
Matco Small Cap Fund and Matco Canadian Equity Income Fund.
Since late November, we have been positive on small cap stocks as an economic recovery play. Eight months later, this investment thesis has continued to pay off for long term investors. Year-to-date, small cap stocks globally have significantly outperformed their large cap peers.
The large stimulus packages announced by G7 governments to support the economy during COVID-19 have led to massive deficits and debts for all nations.
Since the 2015 Paris Climate Agreement, governments and large institutional shareholders have been putting a massive amount of pressure on Big Oil to do more to reduce greenhouse emissions.
On the shareholder front, many of the largest pension, endowment, and sovereign wealth funds have decided to reduce or eliminate the energy sector from their portfolios since Big Oil was not moving fast enough.
With many global stock markets hitting all-time highs, investors feel optimistic despite the negative news of rising daily COVID-19 cases. To better understand what is happening, we need to look below the surface to see how professional investors position their portfolios.
In my last blog I showed that Mr. Trump is not the stock market president, in that the U.S. stock market has had better returns under various presidents during their term and that since 1948, the U.S. stock market has done better under a Democratic president than a Republican.
President Trump has often bragged about how well the stock market has performed since he was elected. With the U.S. stock market recovering all its losses since its March lows and recently hitting a new all-time high, it’s time to do some fact checking
Recently there have been media reports of a few companies that had purchased pandemic insurance. Two notable examples are the Wimbledon Championship Tennis Tournament and the Shaw Festival in Niagara-on-the-Lake.
The International Monetary Fund (IMF) recently posted a blog about corruption and COVID-19.
Pink Floyd’s classic song ‘Comfortably Numb’ sums up the current state of global markets and the economy. Central bankers (‘the doctors’) have successfully revived the global economy (‘the patient’) from the COVID crisis through massive injections of liquidity
Like the Netflix hit series ‘Stranger Things’, the global COVID crisis has turned the lives of billions of people upside down for the last three months.
Since March 22nd, global stock markets have had a powerful rally with Canadian and U.S. stock markets, up 36% and 34%, respectively as of April 29th.
Given the stalling of the global economy in order to stop the spread of COVID-19, central banks and governments are forced into a corner to do “whatever it takes” to dampen the impact of a recession.
On the weekend, Saudi Arabia cut its official crude selling prices for April, effectively launching an oil price war against Russia. The price cut was a result of Russia and Saudi Arabia failing to agree on terms surrounding further production restrictions that were slated to begin April 1st.
Since February 21st, investors have been gripped by the fear of the Coronavirus spreading globally and causing the next recession. Unfortunately, given the digital age we live in, fear, bad news and fake news all spread faster than good news.
News that the Coronavirus (Covid-19) is spreading outside of China, has caused investors to hit the panic sell button. With Covid-19 not yet contained, the economic damage continues to spread from China and across multi-national companies in the airline, hotel, cruise, casino, entertainment and logistics sectors.
This morning one of the Fund’s top ten holdings (with a 3.7% portfolio weight) – Northview Apartment REIT announced a takeover proposal at a 12% premium to yesterday’s closing price. The all cash deal is expected to close in the third quarter.
As of Feb. 4th, Tesla’s stock year to date has gained 112% in less than 24 trading days. Is this parabolic move based on fundamentals or just irrational exuberance? We looked under the hood to check out the facts.