Zach Curry, director and portfolio manager, Greenrock Capital Partners

FOCUS: North American large caps 

MARKET OUTLOOK:

From an overall economic point of view, while inflation remains at elevated levels compared to the previous decade, we think it will decline from current levels going forward. We see inflation declining the fastest in physical products (as supply chains open up from the effects of COVID-19), followed by service offerings as well as wages and benefits. Over the past year, central banks around the world have raised interest rates by record amounts in order to slow and reduce inflation. We believe we have just started to see the results of this (inflation stabilizing and in some cases declining). While interest rates may continue to rise in the near future, we think the amount by which rates will rise going forward will continue to decline.

While rising interest rates have a negative effect on consumers and companies, the declines in the major indices and underlying company values have been reflected to a large degree in our opinion. The stock market (and company-specific share prices) is a forward-looking indicator and tends to look between nine and 12 months ahead. Given the declines experienced in 2022, we believe that investment prices have already discounted a good amount due to the negative effect of rising interest rates and high inflation. The market declines experienced in 2022, while painful in the short-term, have increased future expected equity returns between six and seven per cent annually over the next 10 years, up from a one to two per cent level at the end of 2021. This should benefit investors who are committed to holding investments over the long term and are fully invested. While some additional short-term pain might still be due to come, a focus on quality will help clients through any difficult period more than speculation.

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TOP PICKS:

Amazon.com (AMZN NASD)

Amazon is the largest global internet retailer in the world in operating business segments spanning online retail and physical retail. It generates meaningful revenue from Prime subscription memberships, Cloud services, advertising and an assortment of other hardware and software solutions. The company has nearly 1.5 million employees. It also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Rings, Echo and other devices. Amazon also develops and produces media content. AMZN provides computing, storage, database, analytics, machine learning and other services through its Amazon Web Services (AWS) platform.

Canadian Natural Resources (CNQ TSX)

Canadian Natural Resources acquires, explores for, develops, produces, markets, and sells crude oil, natural gas and natural gas liquids (NGLs). CNQ has become a dominant independent in Western Canada, with a focus on medium and low-risk development opportunities. Through successive stages of growth which have involved both property and corporate acquisitions, CNQ has emerged as the largest heavy oil producer in Western Canada. Over the years, CNQ has made a series of larger strategic acquisitions. Its midstream and refining assets include two crude oil pipeline systems. It operates primarily in Western Canada; the United Kingdom portion of the North Sea; and Offshore Africa.

Brookfield Corporation (BN TSX)

Brookfield Corporation is an alternative asset manager and REIT/real estate investment management firm focused on real estate, renewable power, infrastructure as well as venture capital and private equity assets. It manages a range of public and private investment products and services for institutional and retail clients. BN typically makes investments in sizeable, premier assets across global geographies and asset classes. It invests both its own capital as well as capital from other investors. BN's asset management business has more than US$750 billion under management and is expanding into three new strategies (reinsurance, impact funds and secondary funds). BN is dual-listed on the New York Stock Exchange and the Toronto Stock Exchange.