Looking Back on a Remarkable Year

January 12, 2017

2016 was a remarkable year with several significant surprise events. While we could not have predicted OPEC co-operation with Russia, the UK vote to withdraw from the European Union and President Elect Donald Trump a year ago, we did correctly predict that our portfolios composed of quality dividend-paying Canadian equities would rebound significantly.

US ELECTION TAKES THE MARKETS BY SURPRISE

The fourth quarter was defined by the surprise election of Donald Trump as the 45th President of the United States. The speed with which the financial markets digested the result and formed an opinion contrary to the nightmare scenario that most were predicting just a day earlier was truly breathtaking. Much ink has been spilled trying to predict what the election will mean to both financial markets and the world at large and we will not add to that; we are firmly in the wait-and-see camp. From a purely clinical perspective, our view is that no one person dictates the path of the stock market. Remaining invested in quality companies over time limits downside and produces sustainable returns. Donald Trump will be the 13th US president to take office since we opened our doors in 1939. If he does a good job there is nothing to worry about. If not, he’ll be gone in 4 years and the companies we own will continue on regardless. One thing we will say is that the range of possible outcomes has expanded relative to what could have been expected with the status quo. This means there will likely be continued market volatility in 2017 and beyond. Considering the inflationary potential of fiscal stimulus with low interest rates and full employment, however, we are comfortable with the risk/reward tradeoff embedded in our current portfolios relative to other instruments like cash and longer duration bonds.

Read full Q4-2016 Quarterly Review.

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