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March 31, 2021

A New Season – What Opportunities are Driving Renewed Investor Optimism?

Spring has sprung! While this spring may not have the usual fever, the potential for a normal summer or fall is improving as over 300 million vaccine doses have been administered globally. In terms of your investments, our portfolios have generally done well since investor confidence and markets rebounded quicker than expected. Our overweight equity positioning and underweight government bond exposure since the end of last year provided an additional boost. It appears we are following the same storyline as 2010 when interest rates were last dropped to zero and central banks expanded money supply. However, this current episode is unfolding much quicker as investors learned from the last one.


But, there are a few things that could be different this time around…


Wallets at the ready


We expect inflation to accelerate in the short term as consumers have held off their spending in the last twelve months. This reduced spending, in addition to government subsidies, has generally increased household savings and income. When the world reopens without lockdowns and climbing cases, consumers will pay and suppliers will have pricing power. Reduced inventory could turn into scarcity in the coming months, as we all want the same things at the same time. For me, at least, to travel and have sushi at a restaurant. We have already seen steep price increases in raw materials: cotton, copper, aluminum, oil, etc. Oil prices as measured by West Texas Intermediate, for example, have risen 48% since the first vaccine was announced on November 9, 2020. We have said numerous times, we need to protect our purchasing power since cash that generates no income is not offsetting inflation and government bonds are doing very little with floor-level yields.


The real estate dichotomy 


Typically, demand for real estate rises after a recession. In our current scenario, this may be true for residential real estate as the large drop in interest rates has enhanced purchasing power. Both sales volume and prices have increased in most Canadian cities. However, we expect demand for commercial real estate to remain challenged for longer. The pandemic has potentially changed our lifestyle, permanently; we are more comfortable shopping from home, working from home, having meetings online, etc. This lifestyle change has implications on the demand for malls and office spaces. To account for this, the managers for our real estate portfolio are underweight malls and offices, and overweight self-storage, data centres and health care facilities.


Greener but shorter pastures?


While oil prices are rising, the prospect for the energy sector remains less clear. World leaders are calling to ban fuel-powered passenger vehicles by 2030. It is possible demand and supply will fall at the same time and maintain higher prices at lower volumes. We typically prefer investments that have more certainty over the long term and durability in profits. This time, our investment horizon in the energy sector may be much shorter.


Navigating the circuit board 


To say technology is changing our lifestyle is an understatement. Those of us who went through the boom and bust of the tech bubble in 2000 may be more hesitant to believe than those who didn’t. It’s not a bad thing, but today we are seeing both “profitable” and “unprofitable” tech in stock markets. Not all “profitable” tech are great investments as they could be expensive, and not all “unprofitable” tech are bad as their prospects could change. We delegate that responsibility to our underlying sector experts that not only follow these trends, but also identify the leaders.


It’s important that our portfolios not only invest for value, they also need to remain relevant to changes in people’s lifestyle and habits. This is why we leverage the expertise of our underlying managers and integrate with our broader multi-asset investment philosophy, to ensure your clients’ portfolios are positioned for the best results in the future.


Source: Bloomberg Finance L.P. and CI GAM | Multi-Asset Management as at March 9, 2021. 


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About the Author

Marchello Holditch

Marchello Holditch, CFA, CAIA

Vice-President and Portfolio Manager
CI Multi-Asset Management

Marchello Holditch, CFA, CAIA, Vice-President and Portfolio Manager, oversees CI's multi-manager, multi-asset investment programs. He is responsible for managing CI’s institutional and private client multi-asset portfolios and is a member of the CI Multi-Asset Investment Committee. Previously, Mr. Holditch led CI’s portfolio manager research and oversight function, where he was responsible for evaluating the investment managers of all CI funds. Prior to joining CI, Mr. Holditch worked at a major global consulting firm, where he assisted a wide variety of institutional clients with risk budgeting and asset liability modelling, as well as investment manager research and selection. He holds an Honours Bachelor of Mathematics degree in actuarial science from the University of Waterloo and is a CFA charterholder.

About the Author

Alfred Lam

Alfred Lam, CFA

SVP, Head of Multi-Asset
CI Multi-Asset Management

Alfred has more than 18 years of experience specializing in portfolio design, asset allocation, manager and fund selection, and risk management. While at CI Global Asset Management, Alfred has brought unique ideas and processes to the management of the team’s multi-asset strategies, including a mean-reversion currency management strategy, the concept of investing in concentrated and benchmark-agnostic portfolios, and a new approach to risk management. In addition to the Chartered Financial Analyst (CFA) designation, Alfred holds an MBA from the York University Schulich School of Business, and is a member of the CFA Institute and the Toronto CFA Society.



This document is provided as a general source of information and should not be considered personal, legal, accounting, tax or investment advice, or construed as an endorsement or recommendation of any entity or security discussed. Every effort has been made to ensure that the material contained in this document is accurate at the time of publication.  Market conditions may change which may impact the information contained in this document. Individuals should seek the advice of professionals, as appropriate, regarding any particular investment. Investors should consult their professional advisors prior to implementing any changes to their investment strategies. 


The opinions expressed in the communication are solely those of the authors and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed.


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Published March 15, 2021.