Quaterly Summary 

April 19th, 2021 by Team Chartier, Grandmaison

Description of an image in the News page

The quarterly summary is prepared by our team and published 4 times a year, in January, April, July and October. It is a must read for all our clients who entrust us with the management of their investable assets as we present the main changes we have made to our model portfolios during the quarter, our views on economic trends and the impact they have on our investment decisions. 

Asset Allocation Strategy:

The main adjustment from the previous quarter is a slight increase in the relative weight of equities and a slight decrease in the relative weight of fixed income:

Portfolio Model Revisions: 

During the quarter, the U.S. Banks Income Note Security (NBC21297), introduced in August 2020, was entirely reimbursed in advance and provided the expected 4% semi-annual coupon payment. This redemption gave us the opportunity to reinvest in a new Canadian stock.


Lion Electric (LEV) is a Quebec-based company).  It was founded twelve years ago and is a manufacturer of zero-emission heavy-duty vehicles. With major contracts in place, with well-known companies such as Amazon and Ikea, we are fully confident in the company's potential growth.


As LEV is not yet publicly traded, we have temporarily invested in Northern Genesis Acquisition Corp (NGA), a special purpose acquisition vehicle (SPAC). The NGA shares will be converted into LEV shares at a 1:1 ratio after the special meeting of shareholders scheduled for April 23.


Still on the Canadian equity side, we introduced a new position, Open Text Corp. (OTEX), a company that provides a platform and suite of software products and services that help organizations find, use and share business information from any device.


Our analysts have had a very positive view of OTEX for a long time. The company is looking to build a recurring revenue base (83% of total revenue) and is achieving this largely in the cloud technology through acquisitions and leveraged business expansion. In addition, we believe that the company's ability to develop organic growth is real and inexpensive as it is only marginally reflected in the stock price.  The purchase of OTEX was funded by selling a generic Canadian equity index position.

4thQuarter Highlights: 

The first quarter of 2021 have witnessed days of increased volatility both because of the surge in certain speculative assets (Gamestop, Tesla, Bitcoin...) and because of inflationary expectations due to a strong economic recovery, the main factors being Joe Biden's 1.9 trillion US rescue plan combined with an intensive vaccination campaign and a generalized drop in COVID-19 cases.


In this environment, 10-year interest rates rose sharply, temporarily pushing bond prices lower.  Equities generally reacted well, especially those in more cyclical sectors or regions (energy, financials, Canada, value stocks, etc.), in contrast to so-called growth sectors (technology).


The first quarter also marks the end of the first year of the ongoing bull market that began on March 24, 2020. With a performance unrecorded in more than 60 years, the US stock market index S&P 500 has recovered by +75% in 1 year. This proves once again that government interventions have kept the economic machine on track.


On the Canadian stock market, investors also had an excellent quarter, with the S&P/TSX index up 8.1%.

Ut sed lectus luctus, laoreet risus a, pharetra metus.

Sed varius enim placerat maximus fringilla.

Donec sagittis mi eu neque ultricies pretium.

Cras eu purus in mi tincidunt bibendum non sit amet erat.

In this context of recovery, it is natural to wonder what to expect over the next few quarters, given that historically, the second years of bull markets have all been characterized by positive returns. A temporary correction along the way would not be a surprise, as year 2 of bull markets have always experienced a correction (average of 10%) at one point or another, and still ended with a net positive return (average of 13%).


To watch in coming quarters:

After the Biden administration's stimulus package was signed in March, the new infrastructure plan will drive negotiations in Congress. The issue is how the whole thing will be financed, with tax rate increases being at the heart of the debate between Democrats and Republicans.  Given that the goal of the plan is to stimulate growth, we see this more as a volatility factor than a fundamental risk to the markets.


Further negotiations will be followed between the US and China, at a time when environmental issues are higher than ever on the agenda of international summits.


It will also be interesting to observe the evolution of inflation, a direct consequence of the improvement in the economic situation (reopening of businesses, job creation). Although already anticipated, the rise in inflation could still have an impact on long-term interest rates and therefore temporarily weigh on bond yields, although it will improve their forward outlook.


Finally, the evolution of the U.S. dollar deserves to be watched as it will be an indicator of the U.S. economic health and will result in the appreciation or depreciation of several assets, such as emerging markets and the Canadian dollar.

NBF may act as financial advisor, fiscal agent or underwriter for certain companies mentioned herein and may receive remuneration for its services. NBF and/or its officers, directors, representatives or associates may have a position in the securities mentioned herein and may make purchases and/or sales of these securities from time to time on the open market or otherwise. The particulars contained herein were obtained from sources we believe to be reliable but are not guaranteed by us and may be incomplete. The opinions expressed are based upon our analysis and interpretation of these particulars and are not to be construed as a solicitation or offer to buy or sell the securities mentioned herein. The opinions expressed do not necessarily reflect those of NBF. I have prepared this report to the best of my judgment and professional experience to give you my thoughts on various financial aspects and considerations. The opinions expressed herein, which represent my informed opinions rather than research analyses, may not reflect the views of NBF. The securities or sectors mentioned in this letter are not suitable for all types of investors and should not be considered as recommendations. Please consult your investment advisor to verify whether the security or sector is suitable for you and to obtain complete information, including the main risk factors. Some of the securities or sectors mentioned may not be followed by the analysts of NBF.

Contact us

Get contact information for our team members and find out where our offices are.