Action - Reaction in Financial Markets
"Action-Reaction" is a term we coined back in 2010 when the US economy sputtered coming out of the Financial Crisis of '08. We believe that for every action (financial or economic shock), there is an opposite equal reaction to 'correct' this (usually in the form of policy response). This theme came to mind as we used the same playbook during the recent December 2018 market shock (i.e. 'action'). The reaction was a more dovish Fed and US admin wanting to strike a China trade deal.
In our Q2 Quarterly Outlook Commentary, we share our 'action-reaction' playbook in the different global markets:
- In Canada, we discuss the widening and narrowing of oil differentials, and why we initiated a new position in Canadian Natural Resources.
- In the US, we talk about our thesis on the fundamental value in select health care companies as the sector is facing investor wrath with the uncertainty of 'Medicare for All'.
- In International, we share how there is a lagging effect when implementing stimuli, and how we are now beginning to see an uptick in the Chinese market from the 70 easing measures implemented. We also share how European companies with exposure to Chinese consumers are benefiting from this uptick, and highlight our holding, Prada, as one of the benefactors.
- In Fixed Income, we talk about our active bond strategy and how we've been able to outperform the index with LESS risk.
In the commentary, we touch on the following companies: