Christine Poole, CEO and managing director, GlobeInvest Capital Management

FOCUS: North American Large Cap stocks 

MARKET OUTLOOK:

Financial conditions have tightened considerably following the U.S. banking crisis in early March. The aftershocks have yet to be fully felt and this adds to the anxiety permeating through financial markets, with investors trying to anticipate the path of U.S. Federal Reserve rate movements.

The tightening cycle for central banks is nearing the end. The Bank of Canada is on hold and the Fed has softened its stance from “ongoing rate increases” to “some additional policy firming,” albeit the Fed does not project rate cuts this year. The Fed, however, does acknowledge the events in the banking system are likely to result in tighter credit conditions for households and businesses, which would in turn affect economic outcomes. The Fed’s policy decisions will increasingly be more dependent on incoming economic data.

The leading indicators we track continue to signal a recession on the horizon. We are loathed to say, “this time it is different,” nonetheless, we note that many events over the past few years have been atypical, making accurate macroeconomic forecasting even more difficult.

Financial markets have been concerned about a pending recession for some time. It has yet to materialize. The recent decline in short-term and long-term bond yields following the banking crisis signals both slower inflation and economic growth are ahead. Annual inflation continues to ease, led by goods price inflation, and further deceleration is expected due to elevated base year comparisons, improved supply chains and the effects of restrictive monetary policy on interest-sensitive sectors.

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TOP PICKS

Chubb (CB NYSE)

Recent purchase $186.50 range March 2023

Chubb is a leading global property and casualty insurer, with a proven record of managing risk in both underwriting and investing. Its product depth and geographic reach are sources of future growth opportunities. Chubb provides a dividend yield of 1.7 per cent.

Canadian Apartment Properties REIT (CAR.UN TSX)

Recent purchase price $46.70 range in April 2023

The company owns and manages multi-unit residential rental properties, including apartments, townhomes and manufactured housing communities, principally located in and near urban centers across Canada. The fundamentals in the Canadian apartment rental market remain positive, supported by the strong influx of immigration over the next few years. CAR.UN offers an income yield of three per cent.

Raytheon Technologies (RTX NYSE)

Recent purchase price of $97 range in March 2023

Raytheon Technologies is a leading aerospace and defence company engaged in providing advanced systems and services for commercial, military and government customers globally. Its product portfolio includes avionics, interiors, aircraft engines, sensor and communication systems and missile defence systems. Its commercial aerospace businesses will benefit from the ongoing recovery in global air travel. The stock provides a dividend yield of 2.2 per cent.