Market Outlook

The financial markets are intriguing. First of all, stocks are very strong, although economic fundamentals are less than stellar. The U.S. central bank, the Federal Reserve, cannot figure out why inflation is low but still wants to raise interest rates, despite uncertainties over the tax bill.

Here in Canada, we are beginning to see the full impact of the two interest rate increases by the Bank of Canada. This morning’s retail sales report for September came in very weak, increasing only by 0.1 per cent. Remember the second rate hike was on September 6. So far, we have a flat reading for gross domestic product for July, which turned into a negative 0.1 per cent in August. Exports have been falling for four straight months since June, losing over 10 per cent. So I am keen to see the full slate of September data, and of course, October data could be challenging as well, although by then the Canadian dollar has weakened, giving the economy a bit of a relief.

In this kind of environment, an active management style is extremely important for success in investing. You simply cannot afford to be passive like a sitting duck, such as buying ETFs or some big mutual funds that actually behave like ETFs (what we called "closet indexers"). Active management is the key feature of our firm. We use fundamental and technical analyses to actively pursue the best results for our clients.