It's OK to Look Now

We might be in the heart of a recession (which officially began in February, according to the National Bureau of Economic Research's Cycle Dating Committee and was announced yesterday), but thanks to the stimulus from the Bank of Canada, The US Federal Reserve, other global central banks, the Canadian government, the US government and other governments around the world as well as the Bureau of Labor Statistics, Statistics Canada (for upending the employment forecasts for May) and all the FOMO (Fear of Missing Out), TINA (There Is No Alternative), stock market punters, short-covering hedge funds and super-confident optimists, our client investment portfolios are pretty much back to where they started the year (some slightly ahead, some slightly behind)!

For those of you who were afraid to look, you can look now!

The above are representative of our client portfolios and are actual client investment returns, after fees. As our client portfolios are more specifically tailored to their specific timeline goals and objectives, future cash flow needs and tolerance for risk and volatility, they may vary some from the above. And of course, past performance is not a guarantee of future returns, but we have worked darn hard to keep our client portfolios as sheltered from the huge swings in value (that may trigger unwanted emotional responses) from the volatility in financial markets as possible. That is what allows us to get back on a growth trajectory for meeting our clients goals in the future, more quickly. We started the year under-weight equities in our global and tactical models. We made some value purchases on the way down and we sold them out again as they got expensive. So we are back to being under-weight equities once again because they are really expensive on many fundamental metrics.

As David Rosenberg reminded us yesterday in his daily missive: 

Here is what current stock prices are telling us (about the future):

1) The recession is over and the recovery has begun

2) It is a "V" shaped recovery

3) A vaccine will be ready in the fall

4) Trump will win in November

5) No "second wave"

6) Employment will return to normal very soon

7) The coming 43% plunge in Q2 corporate earnings doesn't matter (because of all the stimulus and liquidity)

8) And that even if there is more stock market volatility, the market believes that the central banks and governments will dig even deeper to prevent any catastrophe.

So we have to ask ourselves what we believe. If we believe all of the above, then we should probably be buying equities too.

If we have any doubts, we ought to stay the course and keep some extra cash, gold and government bonds on hand.

It is the perfect time to re-think your portfolio strategy. 

Our best performing client this year (40/60 example above) has had only about 15-20% of the total portfolio allocated to equities. Now that, I find very interesting.

Do you really need to take all that much risk? Take a look under the hood. Ask yourself that question.