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  • Nicolas Schulman

Quarterly economic update Q2 2020

Dear clients, please note below our quarterly financial recap which aims at shedding some

light on the current dynamics of an ever-evolving macro environment and its impact on our

investment strategies.


V Shaped? U Shaped? L Shaped or W Shaped?


No this is not a geometry test but rather the ongoing debate in the financial markets

regarding the economic recovery. As things stand, we are witnessing a V Shaped recovery

across the board pushing the tech heavy Nasdaq composite into positive territory for the

year. Nevertheless, it’s important to take these numbers with a grain of salt because market

indices are concentrated in their composition. As a matter of fact, a small number of

immense companies now make up and thus dictate overall performance of these indexes.

This has distorted market performance from the actual underlying economic reality causing

an apparent dichotomy between Wall Street and Main Street.


In these moments, adhering to your core investment principles is of the essence. A certain

sense of optimism seems to have taken over with the S&P500 breaching the psychological

3000 level a mere two months after hitting its low on March 23rd. Regardless, the

fundamental question to ask yourself as an investor is: “ Does the current economic

environment and future outlook justify general market behavior?”.


We remain of the mindset that the worst of this crisis will be felt in the next 12 to 18

months. The pandemic we are living is not “resolved” in a couple of weeks and even though

deconfinement has picked up across the globe, we must be careful not to associate this with

a return to pre Covid-19 life.


Some argue that markets are forward looking while economic data is backward looking,

but projecting too far ahead can lead to optimism bias and negligence of the current

information.


Central banks have done an excellent job in keeping the ship afloat but have increasingly

borrowed against future GDP growth and expanded their respective balance sheets

making the future even more uncertain. That is why we prefer to be cautious in

managing your portfolios in order to preserver your capital while still looking to invest in

the companies of tomorrow that will reshape societies. Moreover, tension between

China and the US is rising again, the US elections are in November and there is fear of a

second Covid wave this fall.


We have delivered results throughout this whole market downturn and will keep on

demonstrating the same discipline, rigor and innovative vision to invest your money in

the best way possible. We identify undervalued blue-chip stocks to invest in while

simultaneously seeking companies in fields such as 5G, E-Gaming, cloud services,

healthcare, etc.…


We are truly grateful to you for entrusting us with your investments and remain at your

disposal for any additional concerns you may have. If you have loved ones that need

reassurance and wish to have an in-depth conversation, please remember that we are

available for anyone you care about.

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National Bank Financial is an indirect wholly owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX).

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