Weekly Wrap

Although the tech and AI sector continued to wobble this week, the general trend of the global stock market continued with gains around the world. The US missed out on most of the party with a modest 0.3% gain as investors continue to ‘right-size’ their tech holdings ahead of some major upcoming tech IPO’s. Canadian stocks gained 1.25%, led mostly by financials which continue to fire on all cylinders. Trump and Iran provided conflicting messages to the market, but the energy sector seems to believe Trump’s promises of an impending deal, sending oil prices down 5%. The energy price relief sent EU and Emerging Markets up over 2% this week. Interest rates crept down about 0.05% in light of the drop in energy prices despite the fact that inflation data continues to come in showing that inflation is now reaching three-year highs. There is a growing consensus, however, that doubts the Fed and the Bank of Canada will hike rates unless higher energy prices begin to filter through to rising prices across the broader economy…something that would take a while to materialize if at all. Amazon, meanwhile, was the latest tech behemoth to seek a loan to fund their AI buildout. AMZN issued $14B in bonds in the Canadian market as North American corporate bonds markets continue to get crowded out by tech bonds…much to the delight of the institutional bond market (not me though!)

Market Insights

AI Pushback. Throughout human history, technological advancements and industrial innovations have often been met with heavy scrutiny. Excitement over the possibilities tends to dissipate, at least temporarily, in the face of labor market, price pressures, and/or safety concerns. Deeply negative public sentiment, meanwhile, tends to breed regulation. Disapproval towards healthcare in the run-up to the 2008 election made it a hot button issue, leading to regulatory reform. When confidence in US financial institutions faltered in the wake of the Great Financial Crisis, the Dodd-Frank Act was passed. A series of nuclear-related incidents eroded public support for nuclear energy, leading to a decade’s long stagnation. And now we're beginning to see this with AI. While a majority of nations with polling data agree that AI has more positives than negatives, views on the labor market impact are more pessimistic. Interestingly, the degree of AI skepticism appears to be heavily influenced by the weight of the service sector in a respective economy. It has, however, historically taken crises and an extended period of negative sentiment to catalyze action (Great Financial Crisis, Chernobyl). A tipping point for the AI narrative, forcing politicians to pursue tighter regulation, taxation, redistribution initiatives, and data center restrictions, could come as a result of a crisis, AI-related or not.

Risk on/Risk off: a New Paradigm. The terminology for Risk On and Risk Off (RORO) started back in 2008 with the financial crisis and it was meant to describe periods where investor sentiment would swing between bullish and bearish moves in sentiment. For nearly 20 years now there has been a fairly consistent strategy for those who wish to see the markets through the RORO lens; for the Risk On crowd, buy stocks and maybe even aggressive stocks. For Risk Off, buy bonds, cash equivalents or if you’re feeling more adventurous perhaps some gold. And yet, for most of the last 20 years, bonds have been earning some of the lowest yields in history so the Risk Off crowd had very low expectations and this never put them off. But today, things have changed; Risk On days tends to see tech stocks rise, while gold also rises and bonds seem indifferent. Risk Off days will see tech stocks down, non-tech stocks up, gold down and, again, bonds do little (despite offering relatively generous yields). I am by no means suggesting that we should take advantage of anything here, nor do I get fixated on such short-term swings…In fact, I highly doubt this new paradigm is here to stay because it simply does not make sense. It appears there is a significant short-term thinking (perhaps speculative) investor base that is trying to squeeze profits out of short-term mood and/or news swings all the while neglecting solid long-term opportunities. It is merely the latest distraction for long-term investors to ignore.  

Portfolio Update

This week we selectively trimmed some preferred shares. As a group, preferreds have done extraordinarily well for us so we continue to take profits in order to preserve the gains we have earned. Over the last 12 months we have steadily lowered our exposure, starting by trimming the pref share ETF’s (due to their lack of selectivity) and we are now selectively trimming or selling the individual preferred shares that remain. We have effectively cut our weightings in half with room to trim this further. Although prefs still offer attractive yields in the 5-6% range, the spreads some of the preferreds offer over bonds and other forms of fixed income are getting too slim for our comfort. This week we began to trim our Brookfield Renewable pref share for these reasons.

Please note any changes apply to our PIM Portfolios Only, subject to restrictions. Please call to clarify if you have any questions.

Planning On

The Value of Working with a Financial Advisor

In today's complex financial landscape, having a trusted advisor in your corner can make a meaningful difference in your wealth-building journey. Here's what the latest research shows about the tangible benefits of professional financial guidance.

Building Wealth and Confidence

Financial advisors do far more than simply recommend investments, they are providers of wealth management with tailored solutions to your unique goals and risk tolerance, while offering education and support to help you avoid common investing pitfalls. The results speak for themselves: 90% of investors surveyed agree their advisor makes them feel more confident about reaching their investment goals and ensures a better return on investment. Notably, 90% also believe their advisor is worth the fees (Source: Pollara 2024 Mutual Fund & ET Investor Survey).

Measurable Financial Results

The numbers demonstrate real wealth-building impact. Research shows that households working with a financial advisor for 15+ years can see up to 2.3 times more savings compared to those managing investments alone. On a practical level, clients who work with an advisor could see:

• A 55-60% increase in retirement savings
• A 23-25% increase in retirement consumption

(Source: Saving for the Future, IFIC, 2021)

Better Savings Habits

One of the most valuable services advisors provide is behavioral coaching. An impressive 80% of investors credit their advisor with helping them stay disciplined during market downturns and developing better savings and investment habits overall. This consistency is often the key differentiator in achieving long-term financial success.

Peace of Mind and Trust

Beyond the numbers, advisors create a sense of financial well-being. A question we get probably at least once a month, is “are going to have enough (or do we have enough)?”. Through our financial projections software we can demonstrate – as often as you like – that you are going to be fine. And we can stress test your financial strength against inflation, increased expenses and even market corrections!

Comprehensive Planning Beyond Investments

We offer comprehensive services including retirement and estate planning, tax optimization, and intergenerational wealth transfer strategies. We help guide you and your family through evolving financial needs across your lifetime.

For those with children and grandchildren who are on their own financial journey, if they are going it alone, we recommend a casual push to seek some advice to see what that may look like for them. And to seek ‘professional advice’. According to the BC Securities Commission, a high percentage of DIY investors use social media information to help making financial decisions. This is probably a big driver in the disparity in net worth between those who manage investments alone and those who work with an advisor.

We are here to provide expertise, accountability and peace of mind needed to achieve your goals.  

This information is not intended to provide legal, tax, or insurance advice. To ensure that your own circumstances have been properly considered and that action is taken based on the latest information available, you should obtain professional advice from a qualified lawyer or accountant, as applicable, before acting on any of the information.

Charts of the Week

Spare Time Updates

Sun's out, fun's out: our guide to summer in B.C.

As the sun comes out and temperatures heat up, summer is the perfect time to experience the great outdoors, connect with community and enjoy seasonal flavours all while staying cool.

Affect Labeling: Why Saying 'This Is Rage' Can Help You Control Anger

The next time you're furious, don't try to calm down. Just put a name to the anger coursing through your veins. Say "this is rage"—three words, three seconds—either out loud or silently to yourself, and you've already kept the feeling from swallowing you whole. 

Feel free to share this newsletter with anyone who might benefit from it or find value in it. Thank you for reading our commentary. We welcome your feedback!

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