Investment Q&A

We really do not like government interference in free markets, of course, but the government has asked its CEOs (not representatives or lawyers) to attend a meeting, and this implies they are very serious. The opposition is hammering the Liberals on affordibility and they need to show that they can take action.  The government may try to intervene by putting pressure on grocers not to raise prices on consumers. In the short term, it may limit the ability of these grocers to raise prices further, and the stocks have reacted negatively. It will hurt in the short term, most likely. Downside might be a further 5% to 7%. 

However, we think over the long term it is hard not to raise prices to offset inflationary pressures from higher input cost and labour. Overall, we think the economics of consumer staples is still attractive, most of the names in the sector such as L, MRU, and EMP.A are also trading at attractive valuation (compared to historical averages), and most of them are also buying back shares over time.