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A New Season – What Opportunities are Driving Renewed Investor Optimism?

March 2021

Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager, CI GAM | Multi-Asset Management

Spring has sprung! While this spring may not have the usual fever, the potential for a normal summer or fall is improving as over 300 million vaccine doses have been administered globally. In terms of your investments, our portfolios have generally done well since investor confidence and markets rebounded quicker than expected. Our overweight equity positioning and underweight government bond exposure since the end of last year provided an additional boost. It appears we are following the same storyline as 2010 when interest rates were last dropped to zero and central banks expanded money supply. However, this current episode is unfolding much quicker as investors learned from the last one.

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Bubble, But for How Long?

January 2021


Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager
CI GAM | Multi-Asset Management

Without a doubt, 2020 was a “loss” year. Individually, we lost the ability to live our normal way of life. Globally, currencies lost their purchasing power as central banks added US$9 trillion to the system (leading to price increases in almost everything, including stocks and properties), and over 1.8 million people lost their lives due to COVID-19.

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Turning the Corner

November 2020


Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager
CI Multi-Asset Management

Christmas is almost upon us, which means we will soon close the book on 2020. It was a tough year for everyone as the COVID-19 pandemic drastically changed our lifestyles. Thankfully, humans are creative and adaptive, and we were able to overcome many challenges. As we write this, Pfizer Inc. and BioNTech SE have announced a vaccine candidate that is 90% effective in clinical trials. They expect to seek approval from the U.S. Food and Drug Administration (FDA) shortly and produce 50 million doses in 2020 and up to 1.3 billion doses in 2021. Since each person will require two doses, about 675 million people could potentially be immunized by the end of 2021. Canadians will have access to this vaccine as our government pre-ordered 20 million doses from Pfizer in the early stage of development, but it will take time for the majority of the population to be vaccinated as orders are met. Keep in mind, even if you don’t receive the vaccine right away, your risk of contracting the virus will still be lower as others do. Also good news is other companies, notably Moderna Inc. and AstraZeneca PLC, are seeing progress with their vaccines and have started reporting clinical trial results, meaning the world is not limited to Pfizer’s supply. It’s possible that we could return to “normal” by late next year.

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Where Do We Go From Here?

September 2020

Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager CI Multi-Asset Management

The last few months have been one of the most unusual periods in memory regardless of your age. Many sectors within the global economy shut down and the impact has been even more widespread. While U.S. gross domestic product (GDP) is expected to fall by at least 10% this year compared to 2019, the aggregate price of stocks, as measured by the market capitalization of the Russell 3000 Index, is up by 10% as at September 1, 2020.

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All That Glitters is Not Gold

August 2020

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager CI Multi-Asset Management

The price of gold has rallied this year from US$1,517 an ounce at the start of the year to US$1,975 as of July 31. What was the driver behind this recent surge? The COVID-19 pandemic and lockdowns have caused the steepest drop in gross domestic product (GDP) in modern history. In response, central banks around the world rushed to expand their balance sheets and backstop financial markets, while central governments unleashed record amounts of fiscal stimulus. This action has led to a sharp increase in public debt levels and a drop in real interest rates, making gold, historically considered an effective inflation hedge, an attractive investment. As a result, investors increased their allocations to gold and gold company stocks, supporting prices. When the pandemic hit, we were early adopters of gold and gold stocks, introducing both to our portfolios in the first half of the year. The knee-jerk reaction is to assume that most of the rally is behind us, with gold up over 25% this year. But an inspection of the secular trends in GDP growth, interest rates and central bank balance sheets lead us to a different conclusion.


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Beware the Ides of March

April 2020

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager CI Multi-Asset Management

Much like the soothsayer in William Shakespeare’s Julius Caesar, governments warned individuals in the middle of March to stay home. Social distancing measures have undoubtably reduced the spread of COVID-19 and saved lives, but have also had a significant impact on economic activity. Manufacturing output, employment figures and retail sales are experiencing their sharpest contraction since at least the Second World War. As social distancing measures only became more widespread in the second half of March, activity is likely to fall even more sharply in April. Nevertheless, signs that the infection rate is declining and rapid policy responses have helped drive a partial rebound in stock markets.

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Signature Commentary: Coronavirus update

By Gorlen Zhou, Director of Research, CI Global Holdings Asia
February 3, 2020

The 2020 Chinese New Year holiday in Hong Kong is quieter than usual. Chinese restaurants are usually fully booked during the holiday season, but most of them are half empty nowadays. Even though there are only 15 identified cases of the coronavirus in Hong Kong, locals are being extra cautious – with memories of the SARS in 2003 still fresh. Everyone is wearing mask on the street; companies advise employees to work from home; expats send their families away; and the school holidays got extended by a month. The Hong Kong government effectively closed the Hong Kong/China border, not allowing Chinese tourists to come to Hong Kong.

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Is it time for a revival of the value style?

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager CI Multi-Asset Management

I’ve written in the past about an extreme divergence between the performance of value and growth styles of investing. In brief, value style investing is the selection of securities that are underpriced or undervalued based on an analysis of the operations and finances of the company issuing the securities. Growth investing focuses on companies whose earnings are expected to grow at a rate above the market average. By definition, growth stocks trade at a premium price, but by some metrics, the current valuation premium on growth has not been at this level since the height of the tech bubble in 2000. To understand whether or not the September revival of the value style is sustainable, we must first review what caused the divergence in the first place.

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Winter is Coming: The Geopolitical Recession Begins Now

By Drummond Brodeur

I expect to see a significant global economic slowdown in the next 12 months, with a high chance of a recession around this time next year. I’m not concerned whether we see back-to-back negative quarters; a recession is defined as a significant slowdown in aggregate demand, which is highly likely in the next year in my view. While I believe the direction is set, the pace and severity will remain very policy-dependent. The primary driver of the slowdown is what I am calling a “geopolitical recession” (term borrowed from Eurasia Group) that is creating a permanent state of endemic uncertainty and instability in the global political economy. It is a shift from four decades of increasing globalization to one of deglobalization and collapsing global governance. The escalation in the global tech and trade wars will drive a decoupling of global supply chains and significantly lower economic growth. I expect the negative impact on earnings to be significant, as decades of increasingly complex interconnectivity cannot be unwound without unintended consequences.

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Trade War: What is it Good For?

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and Marchello Holditch, CFA, Vice-President and Portfolio Manager, CI Multi-Asset Management

At the beginning of the year, an escalating trade war between the U.S. and China was noted as a risk to our outlook, which was that global economic growth is likely to remain positive in 2019, albeit at a much slower pace. Although we were initially pleased with the positive tone surrounding U.S.-China trade talks in the first quarter of the year, discussions have taken a turn for the worse in the past month. There’s large debate about who “wins” in such a dispute, but the reality is that both sides lose. Tariffs, like other taxes, are inherently growth-sapping and potentially inflation-boosting. Arguably, the U.S. has less to lose, with shipments to China coming in at less than 1% of U.S. gross domestic product. However, the U.S. imports more than 20% of its goods from China, leaving the consumer, the engine of the U.S. economy, worse off. Not to mention the impacts on business confidence and profit margins.

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The Power of Zeros

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, Vice-President and Portfolio Manager CI Multi-Asset Management

It has been 10 years since stock markets bottomed in 2008-09 following the financial turmoil caused by excessive leverage. Since then, many central banks globally have reduced interest rates to zero and collectively injected over US$10 trillion dollars into the economy. If you are wondering how many zeros there are in 10 trillion, the answer is 13. That’s $10,000,000,000,000! While the power of zeros has been effective in boosting both investor confidence and economies globally, we have made a few observations:

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Seizing opportunities

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, Vice-President, CI Multi-Asset Management

Over the first quarter of 2019, global economies continued to slow, Brexit and U.S.-China trade remained uncertain, but the key theme was the pivot in U.S. Federal Reserve policy. Expectations went from rate hike to rate cut within a month, one of the most dramatic changes in the Fed’s history, and all asset classes rallied during the first quarter as a result. While corporate earnings are expected to decline, equity price-earnings ratios, which are a measure of investors’ willingness to pay for future earnings, has increased to support this rally. In fixed income, even though central bank rates have not yet changed course, the markets are pricing for rate cuts soon. Investors are buying bonds to lock in current rates, assuming that future rates will be lower.

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The Fed is the new macro

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer
Marchello Holditch, CFA, Vice-President, CI Multi-Asset Management

Stock markets have rallied significantly and consistently since 2009 when central banks cut interest rates to zero and increased the money supply through quantitative easing (QE) programs. Ten years later, these measures are largely still in place. Even though it is not their mandate, central banks have been supporting financial assets while promoting risk-taking without consequence. With no end in sight, economists have described this as the “new normal.”

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This is what it sounds like when doves cry

By Alfred Lam, CFA, Senior Vice-President and Chief Investment Officer and
Marchello Holditch, CFA, Vice-President

Markets roared back in January from December’s steep sell-off. The S&P/TSX Composite Index was up 8.7% – it’s best month in a decade. In the U.S., the S&P 500 Index had its best January performance in over 30 years. International equities also surged and the “risk-on” sentiment echoed across other asset classes, such as corporate bonds. This is hardly the outcome one would expect to go along with mixed corporate earnings and growing evidence of a slowdown in global economies. If underlying fundamentals haven’t changed, then what gives? The answer is, once again, a dovish pivot by the U.S. Federal Reserve (Fed). The Fed’s recent statement has effectively put a floor on asset prices by implying that if things get more challenging, it will provide a bailout by lowering interest rates and adding money supply, a “Fed put,” so to speak.

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How did investors do in 2018?

By Alfred Lam, CFA

During any extended stock market rally, a curious thing tends to occur: several close acquaintances – who aren’t professional investors – enjoy offering me their unsolicited advice on how to make money. But when markets fall, the same group often panics, demanding to know what they should do. This mixed bag of behaviour – a combination of overconfidence and anxiety – is common during every business cycle.

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Is it time to cue the raven? Nevermore?

By Sandy McIntyre

Capital Markets Strategist, CI Investments


The time has come for the annual rite of forecasting. What will 2019 bring? If you believe the stock market, the time has come to price in
an economic slowdown. Whether or not what evolves is a “slow patch” or a full recession is up to the Federal Reserve Bank (Fed) in the
United States.

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The Signature Position: Latest Equity Market Sell-off

By Jean-Philippe Bry, October 12, 2018

To quote the market’s most stable genius in chief, Donald Trump, a stock market correction was overdue. A correction was something we have been anticipating, and highlighted as recently as early October at our conference in Scottsdale, Arizona.

The premise is that as rates normalize at higher levels, volatility – long suppressed – would ultimately normalize as well. The period when both rates and stock markets would rise, encouraging increased risk taking, appears to have reached its limits – at least for now.

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Are We Witnessing the End of the Unbridled Globalization Era?

By Eric Bushell

After living through a year of confrontational statements from President Trump, I can understand why investors have tuned out from the daily Washington beat. It paid well to consider it all a distraction in 2017. That is no longer the case. With the loss of centrists from positions of power in the White House this Spring, more extreme voices have taken charge; and they are mobilizing policy that reflects their worldview. Trade barriers to satisfy populist electorates are only one dimension of the agenda.

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Market Commentary on The Return of Volatility

The latest sell-off marks the first substantial increase in volatility after a lengthy period of relatively quiet markets. While it may be disconcerting for many, it’s critical to understand the background and context – what’s driving global markets – and what this means for our (we’re invested alongside you) investments going forward. The key advice: There is currently no need to panic.

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volatility has returned

In February 2018, stock markets experienced more volatility in one month than in all of 2017. Last year, the maximum drawdown of the S&P 500 Index was -2.8%, meaning that any investor who bought at the top of the market and sold at the bottom would have lost 2.8%. In February, the maximum drawdown was -8.6%. Market sentiments have changed. The strategy of buying any investment at any price may have worked well in 2017 but likely will not work going forward.

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The Importance of Risk management in a late investment cycle

We had another solid year in 2017. Equity markets were very generous; fixed income – not so much. The U.S. dollar depreciated significantly against the Canadian dollar and cut into U.S. market gains experienced by Canadian investors. Our decision to invest more in foreign markets and hedge a portion of foreign currencies added value. In terms of stock selection, growth stocks outperformed value stocks significantly. Using the MSCI World Index as a benchmark, growth-style stocks outperformed value by 10%.

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Market Commentary on U.S. Election

Last night’s election results remind me of the1971 Monty Python album “And Now for Something Completely Different.” Donald Trump is president-elect of the United States.

The good news is that we have a clear winner with a clear mandate to “Make America Great Again.” Trump is the polar opposite candidate to President Obama.

His election symbolizes the public’s frustration and determination to try something completely different, come what may.

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