Christine Poole, chief executive officer and managing director, GlobeInvest Capital Management

FOCUS: North American large-cap stocks

MARKET OUTLOOK:

The enthusiasm surrounding AI has propelled the broader stock market indices higher this year. The much-anticipated recession has yet to arrive, and the anticipated timing continues to be pushed out by economic forecasters. The number of jobs being added in both Canada and the U.S. continues to suggest that the North American economy is still sound, despite central banks trying to cool things off for over a year now.

Headline inflation is coming down at a much faster pace than core inflation, which excludes food and energy prices. The stickiness of elevated core inflation above the target range concerns central bankers and has kept them on a restrictive monetary path. Rent inflation has been a large contributor to the sticky factor and should moderate as the year progresses due to the base year effect and additional supply of multi-family housing units coming on stream.

The resilience of U.S. consumer spending in the face of high prices can be attributed to the amount of wealth that was accumulated during the pandemic from government stimulus payments and a spike in the personal savings rate. This resulted in significantly higher liquidity buffers. Over the past year, personal savings have now been drawn down to pre-pandemic levels, and the savings rate has declined to historical levels. Going forward, consumer spending will be more sensitive to traditional drivers such as wage growth and the labour market. In addition, the resumption of student debt payments in October will weigh on consumer spending later this year.

The upcoming corporate earnings season will give investors a better read on the state of the economy, the health of the U.S. consumer, capital spending plans, and lingering supply-chain concerns. Better-than-expected guidance for the back half of the year will be supportive of continued price gains.

• Sign up for the Market Call Top Picks newsletter at bnnbloomberg.ca/subscribe
• Listen to the Market Call podcast on iHeart, or wherever you get your podcasts

TOP PICKS

Chubb Ltd. (CB NYSE)

Recent purchase $191.50 range May 2023

Chubb is a global property and casualty insurer, with a proven record of prudently managing risk in both underwriting and investing. Chubb continues to expand its product offerings and geographic reach, seeking attractive growth opportunities. Chubb provides a dividend yield of 1.8 per cent.

Thermo Fisher Scientific (TMO NYSE)

Recent purchase $508.50 range in June 2023

TMO is a leading global provider of products and services to pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies as well as companies operating in food safety and process control settings. TMO supplies the “picks-and-shovels” or tools to healthcare companies which are needed to develop and manufacture drugs and vaccines and diagnose illnesses/diseases. In addition to organic growth opportunities, TMO has a proven record of making accretive acquisitions and applying its continuous improvement process to enhance financial performance. TMO offers a dividend yield of 0.3 per cent.

Visa (V NYSE)

Recent purchase price $228.50 range in June 2023

Visa is a global payments technology company, operating the world’s largest retail electronic payments network and providing financial institutions with a broad range of platforms for consumer credit, debit, and prepaid payments. Visa benefits from the secular shift from cash/cheque to card-based and electronic digital payments. Visa is also a natural beneficiary in the growth of e-commerce/online retail spend. Visa offers a dividend yield of 0.7 per cent.

PAST PICKS: July 19, 2022

Aritzia (ATZ TSX)

• Then: $37.18
• Now: $26.45
• Return: -29%
• Total Return: -29%

Brookfield Corp. (BN TSX)

• Then: $60.29
• Now: $44.02 
• Return: -10%
• Total Return: -9%

Raytheon Technologies (RTX NYSE)

• Then: US$93.82
• Now: US$96.75
• Return: 3%
• Total Return: 6%

Total Return Average: -11%