Second Quarter 2017

This most recent quarter has seen the continuation of synchronous global economic growth. This expansion is supported by increasing evidence that previously struggling emerging economies, such as Brazil and Russia are now back on track. India, under new leadership attempting to initiate long overdue reforms, is now growing faster than China. While the growth curve for China has flattened somewhat, it nevertheless continues to add impressively to its GDP. In Canada, the economy has shaken off the negative effects of the dramatic downturn in the energy industry and has returned to growth mode.

While this is all very promising, the United States remains the most important component, and indeed the leader, of the global economy. The U.S. economy is now in the midst of its third longest economic expansion since 1850. This growth, which commenced in 2009, has been slow but remarkably steady. Furthermore, the U.S. economy is proving that its size and resilience is capable of withstanding the unimpressive current executive leadership in the White House.

As global growth gathers steam, it is providing leading central banks around the world an opportunity to return interest rates to a more “normal” realm. Led by the U.S. Federal Reserve, several central banks are starting to inch rates back up, albeit cautiously and in small increments. With inflation in the developed world almost non-existent, there is no need for rates to rise dramatically.  Interest rates edging higher are a sure sign of the global economy becoming increasingly healthy and reflect a genuine return to normality following the 2008-2009 financial crises.

An integral component of the strengthening U.S. economy is its deep roster of world leading publicly traded corporations. Regardless of sector, the industry leaders in terms of size, global reach, and innovation are invariably American. There has been recent concern that the publicly traded company was becoming an endangered species. The high cost of disclosure and the glaring scrutiny of the public markets has incentivized many public companies to “go private”, either being bought out by their managers or acquired by a growing contingent of well-capitalized private equity firms. While this has certainly been the trend among many small and mid-sized enterprises, it has not affected the larger companies that we focus on.

With this in mind, we have continued to pursue our research into many U.S. based companies, always looking for new additions to our client portfolios. Over the past four months, we have either met with, or attended the institutional investor presentations of over 60 U.S. companies, including the majority of the companies that we are currently invested in.

This does not imply that we are ignoring Canada. We have many long standing equity positions in Canada that have served us well. When it comes to energy, banking and utilities, our Canadian companies need not take a back seat to anyone. As we do south of the border, we remain vigilant of the opportunities provided in our own home market.




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