Christine Poole, co-chief investment officer, Davis Rea
Focus: North American large caps
Top Picks: CGI, JPMorgan Chase, RTX Corp
MARKET OUTLOOK:
A highly unpredictable and destabilizing U.S. trade policy has stoked volatility in financial markets. Stock markets sold off sharply following the reciprocal tariffs announced by U.S. President Donald Trump on April 2, which were much more punitive than expected. The president has since back tracked with all countries, except China, announcing a 90-day pause period when a baseline 10 per cent tariff will apply. And then more recently, further concessions were announced exempting most consumer electronics exports from China’s 145 per cent tariff rate.
Recent developments suggest the White House might be willing to show flexibility and engage in potential tariff negotiations. Nevertheless, the 90-day pause extends the period of trade policy uncertainty, which continues to dampen confidence among consumers and businesses alike. Historically, lower confidence has led to reduced spending and hiring, posing challenges to economic growth.
Tariffs raise the cost of imported goods, prompting companies to pass these higher costs on to consumers, which in turn drives up prices and slows economic activity. Stagflation - a combination of stagnant growth and rising inflation - is an undesirable outcome, likely to prompt both fiscal and monetary measures aimed at mitigating its effects on the economy.
The decline in stocks signals a weaker growth outlook, though the full extent of the slowdown remains hard to assess due to unresolved trade policy issues and the trade war’s effect on corporate earnings. We anticipate continued market volatility until greater clarity emerges.
Investors are encouraged to focus on what they can control - maintaining a well-diversified portfolio across asset classes and sectors. Staying invested with a long-term perspective allows the power of compounding to work in their favour.
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TOP PICKS:
CGI (GIB.A TSX)
CGI is a leading global IT services, consulting, and outsourcing firm. Its sales are split between managed services/outsourcing representing 55 per cent of revenue and systems integration and consulting services 45 per cent of revenue. Its client base is diversified across multiple industries and geographies. CGI recently implemented a dividend, providing a projected dividend yield of 0.4 per cent.
JPMorgan (JPM NYSE)
JPMorgan Chase is the largest bank in the U.S. engaged in consumer and corporate banking services, investment banking, and wealth and asset management. Led by a well-respected management team, the bank has a solid track record of successfully navigating to outperform through the cycle. JPMorgan offers a dividend yield of 2.4 per cent.
RTX Corp (RTX NYSE)
RTX is a leading aerospace and defense company engaged in providing advanced systems and services for commercial, military and government customers globally. Its product portfolio includes avionics, interiors, aircraft engines, sensor and communication systems and missile defense systems. Its commercial aerospace businesses benefit from the growth in global air travel while demand for its defense products is robust due to ongoing geopolitical conflicts. The stock provides a dividend yield of 1.9 per cent.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GIB.A TSX | Y | Y | Y |
| JPM NYSE | Y | Y | Y |
| RTX NYSE | Y | Y | Y |
PAST PICKS: March 21, 2024
Alphabet (GOOGL NASD)
- Then: US$147.60
- Now: US$147.55
- Return: -0.34%
- Total Return: 1%
Mondelez (MDLZ NASD)
- Then: US$72.21
- Now: US$67.39
- Return: -7%
- Total Return: -3%
Zoetis (ZTS NYSE)
- Then: US$168.32
- Now: US$147.23
- Return: -12%
- Total Return: -11%
Total Return Average: -4%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| GOOGL NASD | Y | Y | Y |
| MDLZ NASD | Y | Y | Y |
| ZTS NYSE | Y | Y | Y |
