5i Research Update, contest, and webinar

Holiday Gift Giveaway Ends Soon

Being the holiday season we would like to remind members that we have a gift subscription feature that allows you to purchase 5i as a gift and choose the day the subscription activates along with a personalized message sent on the same day.

To make it a bit more fun and to give you a chance to get something in return, we are also running a giveaway promotion. If you purchase a gift subscription, you will be entered into a giveaway with $5,000 in cash prizes and a number of free subscriptions. But, we are limiting the number of available entries to only 500. You can learn more and enter here

If a 5i Research subscription is not in the gift budget, you can still participate in the giveaway by purchasing a new ETF Update subscription for yourself. Get access to the monthly newsletter that offers commentary on Canadian and US ETFs, portfolio tools, as well as ETF model portfolios (the growth model ETF portfolio is being published next week). You can learn more and enter here.

Updated Reports:

We have updated reports on Sun Life Financial, Extendicare and CAE Inc. Two of the names are stocks investors may want to consider if looking for more of a defensive tilt to a portfolio. The other name is in the right space but not one of our favourites amongst peers. 
Market Update:

Lately, it seems that a good day in the markets is a day when markets are not down 2%. As we approach year-end, the markets seem to be favoring the downside, due to extreme negative market sentiment and tax-loss selling. You have likely heard the phrases "bear market" and "recession on the horizon" at least a few times this week from media outlets. However, media outlets tend to thrive on focusing on negative news, so it is important to filter out the noise and focus instead on the fundamentals. In our view, the picture is neither grim nor overly optimistic going into 2019, however, even if a bear market occurs, it will be temporary and likely based on market sentiment more than actual concerns over the economy. 

The Federal Reserve rate hike this week of 25 basis points shook the markets for a fourth time this year, especially with the signaling of expectations for further hikes in 2019, rather than no hikes as many investors had hoped for. On a positive note, Fed projections in further rate hikes indicate its confidence in future economic growth in the U.S.

Earnings: Investors will be paying close attention to earnings which may drive the markets next year as high valuations are less of a concern after recent market weakness. With earnings growth estimates dropping to the single digits for the S&P 500, companies with double-digit growth or strong earnings surprises may attract investor attention.

Opportunities in 2019: With the continued weakness in the markets, we find it hard to be overly excited about buying new names aggressively heading into year-end but think investors should be sharpening their pencils on their 'wish list' for stocks in Canada and the US. A bear market or a correction can be good news for investors and buyers with a long time-frame. If your time horizon is 3-5 years or more, buying in a bear market can be one of the best things to do for your portfolio.

Model Portfolio Update:

We are disappointed to report that performance for the Balanced Equity model portfolio is set to have the first negative year of performance since inception. Being down 7.6% as of November, it is highly unlikely the portfolio will rebound before year end. While we would always like the portfolio to go up, years like this happen. Further, they generally HAVE to happen in order for a portfolio to outperform a market in any material way over the long-term, as the portfolio has done.

It is important to keep in mind that it is just one year, and a single year in what has been a very volatile one. With the TSX down 12% YTD as we write this, the current portfolio result (while not ideal) is also not such a poor result on a relative basis. Add in a total return performance for the TSX of 33.9% compared to the BE portfolio at 140.4% over the same period since inception and things look better over a longer period. Of course, for new Members, this is less comforting but this is where we go back to it being a single year in what took five years to attain. While there is no guarantee the next five years will be as good for the portfolio as the past five have, an investor needs to continue to think in terms of years and not months.

We have been getting some questions around what we will do with the portfolios in a bear market or recession but given the performance since the portfolio started, changing things in a portfolio that has been working, because of a bad market this year does not seem like the right move. Of course there will be adjustments and rebalancing from time to time but we do not see a need to turn things upside down and will continue to seek out the best companies we can find in Canada. 

This does bring up an important distinction though - We cannot determine what is the right mix of stocks, bonds and cash for you. This is a personal decision. The model portfolios are intended to be a model for Canadian equity exposure. We have not and do not plan to get into the 'game' of timing markets and making 'go to cash' decisions. We may hold elevated levels of cash from time to time but the amount of cash an investor holds in a portfolio is again a personal one and we want to be clear that the portfolios will not be used like tools for timing.

Upcoming Webinar:

This brings us to a bonus webinar we will be offering. With a lot of comments and questions on what to do in a bear market, we will be hosting a webinar on this topic in the New Year. Stay tuned for more on this after the holidays. In the meantime, all we ask when we do extra materials and presentations like this is that you take a second to tell a friend about us or even consider buying a gift subscription to enter the giveaway we are running (where you might also win something).

As the year comes to an end, our final comments are to not forget the importance of friends and family over the holidays. Money means very little without someone to share things with. We will be running with limited staff at 5i over the holidays, and question answering will not be as fast as usual. Remember that if you cannot ignore your portfolio for a week or two, it is probably positioned far too aggressively. We wish everyone a safe and happy holiday season. 

Best wishes for your investing!
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