2019 Q2 Snippets Danny Popescu 07/12/2019 706 Closed Happy Friday, Coming off a strong rally in Q1, in Q2 stocks continued higher at a more moderate but still healthy rate with the S&P500 gaining 1.84% (in CAD) and the TSX Composite 2.59%. Equity markets were volatile in Q2 with April and June seeing strong rallies while May’s returns erased April’s gains. The market is often a game of tug of war; at present, global economic indicators are weakening, and tariffs are having an effect, but central banks are providing easy money in an effort to offset the impending slowdown. It is these two forces which combined, create widening swings aka volatility. The Canadian dollar traded in a tight range in April and May but rallied 2.3% in June and finished the quarter up 1.25% and closing at $0.765 US. Oil prices experienced significant volatility during the quarter, with West Texas Crude reaching $67/barrel in late April, then falling to $51 in early June and closed out the quarter at $58. The Canadian Universe Bond Index finished the quarter rising 2.52% and up 6.5% for 2019, driving Canadian 10-Year bond yields lower over the quarter to finish at 1.47%. With the 1-Year bond yielding 1.7%, the Canadian Bond curve remains inverted, but take that as you may because strong economic data was released this week which drove the Bank of Canada to increase its growth projection for Q2 to 2.3% annualized. The low-interest rate environment has been driving money into equities, especially defensive & dividend paying stocks (utilities, consumer staples, and real estate) as they now provide a higher yield than bonds do. Of course, this drives up equity valuations and we need earnings to increase to justify higher prices. Our stance has not changed: we’re playing it defensively in the equity space by focusing on quality names and continuing to increase our alternative asset classes to maintain negative correlation to public markets. Have a good weekend! 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