“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair”

A Tale of Two Cities, Charles Dickens, 1859

Dear clients and friends,

Are you as flummoxed as us with things since our last update on April 9th?

The quote above is meaningful because it emphasizes that there are no perfect choices, financially or health wise. We are sandwiched between progress and sacrifice. The only way to move forward is to make a plan and adjust it as we go.. Many of you probably feel as we all do, like a kid with their nose pressed up to the candy store window.

Protecting Portfolios & Understanding the Market During COVID-19

Since April 9th, the financial world has been a tale of two cities. The Dow Jones Index has recovered 25% from the March 23rd lows1, and year to date the U.S. and Canadian markets are down a mere 15%2. However, we suspect that the market rally from April contains some underlying rot and we have implemented strategic changes to Canadian and U.S. equity holdings as demonstrated in this document. Once again, Wall St. and Main St. are diverging, just as they did in the great recession of 2008/2009. The unemployment and devastation in the discretionary economy (travel, entertainment, restaurants, etc.) is only part of the overall market, and other aspects of the market, including companies that we now own, are rallying. As market volatility continues, we are dollar-cost averaging into markets as we’ve always done.

Our average client portfolio, structured with 35% fixed income and 65% equities, is already holding a large portion of high quality, short term and government bonds.

We have made significant changes to our equity holdings to shift portfolios away from the COVID-19 blast zone and repositioned for a post COVID-19 world. We have also rebalanced asset classes, as we always do when major volatility occurs. The Investment Policy Statement and overall financial planning that we review with you annually has been a pillar of strength during this period.

As mentioned above, this document shows the top Canadian and U.S. equity holdings of our portfolios as of February 29th, 2020, and April 30th, 2020 to highlight the substantial changes we have made to portfolio equity holdings. We have replaced 30% of the original, pre-COVID-19 top equity holdings. You can see for yourself the significant changes we have made.


Clients who have been with us for longer than 10 years will recall our comments from 2010 that “you can’t fight the Federal Reserve”. What this means is, when the U.S. Federal Reserve opens the floodgates of money and liquidity to markets and the economy, as they’ve done now and in 2008/2009, it’s best to ride the wave. If or when the wave crashes onto the beach is anyone’s guess. Many worry that this massive macroeconomic policy will result in equally massive inflation. We don’t think so.. Since 2008/2009, the introduction of new money into the markets from the Federal Reserve has had a very small impact on inflation3. This is due to two main factors; first, the inflationary costs of labour and capital have been largely diminished by the introduction of technology. And second, the productivity of this new Federal Reserve capital is low. New money that has been added to the economy has been primarily “bail out” cash, not money that generates productive assets like infrastructure or the production of goods.

With this in mind, we expect that negative interest rates are coming to North America. Hence the need for a balanced portfolio of quality stocks, bonds, cash and real estate. Diversification is essential.

Evaluating Your Financial Advisor

On May 12th, the Globe and Mail published an article by Rob Carrick about the value of a financial advisor during difficult times. At Stonegate, we have always strived to offer a comprehensive approach to your financial planning. As you know, we focus on all aspects of your financial life, not just investments.

Carrick provided a checklist for evaluating a financial advisor, and we are happy share the list here because we believe, and we hope you would agree, that Stonegate satisfies each component.

If you feel that Stonegate is missing something or isn’t adequately achieving the goals you had in mind, let us know. This list can help us start the conversation.

Quarantine: Is the end in sight?

Back in March when quarantining began for Canada, we said that the issues and unknowns would be much clearer by May 15th. Here we are. When quarantine began, the President of Starbucks stated that it would take two months to figure things out. Well, time’s up. The purpose of the quarantine, aside from maintaining the health of Canadians, was to give the government time to figure things out. What are we waiting for? Hospitals aren’t over capacity, testing centres remain empty and the curve of infection has flattened. We have good enough data and information from which to move forward. If we truly are “in this together”, companies and workers need to lead the solution. The task of being the government for those in need is too big. It’s time for us to help lead the government. Consider the plan laid out by Salesforce CEO Mark Benioff; 1) Encourage workers to wear masks, 2) wash your hands often, 3) maintain appropriate social distancing 4) get tested, and 5) if you become ill, trace your exposure.

We need progress. Today’s blame game culture in which the media and politics reside sometimes prevents good leadership for fear of winding up on the wrong side. Consider how Winston Churchill must have felt in June 1940 when he was faced with the invasion of England. Leadership, hard decisions and commitment are needed. We are at a point where it’s impossible to move forward and look good at the same time. We need to take our lives into our own hands and blame no one. Photographic clearness and truth are not available. We need to get back to work.

Thank you

Over the past two months we have communicated with many of you. We are fortunate and grateful for your business and the excellent relationships we have with you. You have provided us with excellent feedback, intelligence and information about you and your company’s plans and progress. It’s invaluable information that we use and share. Thank you. Contact us anytime. There is no call centre at Stonegate. We will never leave you on hold. We are here for you.

“It is a far, far better thing that I do, than I have ever done; it is a far, far better rest that I go to than I have ever known”

The last sentence of A Tale of Two Cities

Resurrection of the economy and the future is in our hands.

Happy Victoria Day!

Rob & Mike

1.Dow Jones Index percentage change calculated between market close on March 23rd, 2020, and market close on May 13th, 2020.
2.Based on S&P/TSX Composite Index performance from January 1, 2020 to market close May 13th, 2020.
3.Hoisington Investment Management Q1 2020 Report.

This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. This material is not intended to provide, and should not be construed as providing individual financial, investment, tax, legal or accounting advice. You should consult your professional advisor(s) prior to acting on the basis of the information herein. The views and opinions expressed herein are those of the author and do not necessarily represent the views or opinions of Stonegate Private Counsel and its affiliated companies. Stonegate Private Counsel is a division of CI Private Counsel LP, a wholly owned subsidiary of CI Financial Corp.. Stonegate Private Counsel is a registered trademark of CI Investments Inc. Copyright © 2020 Stonegate Private Counsel. All rights reserved.

*Returns determined by calculating the average returns of a sample subset of clients with a 35% fixed income and 65% fixed income asset mix.
Stonegate Private Counsel is a division of CI Private Counsel LP and is an indirect wholly-owned subsidiary of CI Financial Corp. Stonegate Private Counsel is a registered trademark of CI Investments Inc. Copyright © 2020 Stonegate Private Counsel. All rights reserved. The opinions expressed here are those of the author and may not necessarily reflect those of Stonegate, or its affiliates. Neither CI Financial nor their respective officers, directors, employees or advisors are responsible for damages or losses of any kind in respect of the use of this information. The information provided is general in nature and is subject to change without notice. Every effort has been made to compile this information from reliable sources however no warranty can be made as to its accuracy or completeness. Please speak to an investment professional before acting on any of the information provided.

© 2020 Stonegate Private Counsel, a division of CI Private Counsel LP. All rights reserved. www.stonegatepc.com