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Yann Furic
B.B.A., M. Sc., CFA®

Senior Portfolio Manager, Asset Allocation and Alternative Strategies

Hopes for the decade

After finally turning the page on 2020, we all hope that the events of the coming weeks and months will give us a more positive outlook on the future.

As far as the stock market is concerned, the situation remains positive, despite the gloomy news about the pandemic.

Good news

The various announcements concerning the more than 90% effectiveness of the vaccines developed by Pfizer-BioNTech and Moderna which followed the U.S. elections of November 3, 2020 excited the markets and suggested a return to some degree of normalcy in the medium term.

Government fiscal programs, combined with the still accommodative measures of global central banks, have continued to drive the markets higher. These interventions, coupled with the hope for a return to normal in the near future, could be particularly beneficial for more cyclical sectors, such as materials, energy and industrial products.

Fresh outlook

It seemed unlikely that the Democrats would win the two seats up for grabs in the Senate runoff elections on January 5. And yet … The blue wave materialized, and the Democratic Senate majority, considering the Vice President’s vote, means that the Democrats now officially control the presidency and both houses of the U.S. Congress.

The stock markets reacted positively, despite expectations of a negative response to this outcome, which portends tax increases and stronger social measures. This is because the severity of the pandemic in the U.S. and its impact on the economy will undoubtedly force the new Democratic administration to postpone tax hikes, while increasing the fiscal stimulus for businesses and individuals. This delay will avoid worsening the economic situation, while allowing it to eventually recover.

Stéphane Girard
MBA, CIM®, Fin. Pl.

Investment Specialist, Products Knowledge

What can we expect in the first months of 2021?

The vaccination of the population and especially the speed at which this vaccination can be carried out will have a significant impact on the stock market sectors to be favoured, i.e. those which still benefit from telework, versus those which will benefit from the reopening of the economy and stimulus packages.

Don’t confuse the economy and markets

The strong performance of the markets in 2020, particularly in the United States, is mainly due to the composition of the stock indexes. The sector weightings of the various global stock indexes are very different from their weightings in the overall economy. For example, technology stocks make up about 23% of the U.S. stock market, but these technology companies represent only 7% of the country’s economic activity. These stocks were the big winners of the past year, since they didn’t suffer any negative impact from the lockdown measures and telework; in fact, they rose sharply due to the popularity of e-commerce.

The same thing happened in Canada, with Shopify alone accounting for the entire return of the Canadian S&P/TSX Index. Its market capitalization represents almost 6% of the total market and its return was 178%. As a result, 6.89% of the return generated by the S&P/TSX in 2020 is due to the performance of Shopify’s stock. Without this contribution, the return of the index would have been negative since the return over the past 12 months was 5.6%.

How are we positioning our portfolios?

We have maintained our barbell positioning, where we invest in both defensive issues and those that will benefit from the reopening of the economy, such as industrial products. We also added small- and mid-cap stocks which will benefit from a cyclical recovery, particularly those of banks, which perform well in an environment where long-term interest rates are higher than short-term, since their borrowings are short term and their loans, long term.

In a context of economic recovery and infrastructure spending, the Canadian stock market could perform well since the S&P/TSX index is heavily weighted in the banking, metals, energy and industrial products sectors.

Cautious optimism

Faced with this still uncertain start to the year, we remain vigilant and proactive. Many things will become clearer in the coming weeks and we will keep you informed of developments. Protecting your wealth remains and will always be our priority.

Happy New Year 2021 and until next time!

Have questions about your investment portfolio? Talk to your advisor: he is available and ready to share his financial intelligence with you!

Yann Furic, B.B.A., M. Sc., CFA
Senior Portfolio Manager, Asset Allocation and Alternative Strategies

Stéphane Girard, MBA, CIM®, Fin. Pl.
Product Manager, Professional Practice


Les informations contenues aux présentes proviennent de sources que nous jugeons fiables; toutefois, nous n’offrons aucune garantie à l’égard de ces informations et elles pourraient s’avérer incomplètes. Les opinions exprimées sont basées sur notre analyse et interprétation de ces renseignements et ne devraient en aucun cas être considérés comme une recommandation. Pour toutes questions, n’hésitez pas à communiquer avec votre conseiller en gestion de patrimoine ou votre spécialiste en matière fiscale, comptable ou juridique

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