Insights

It’s no secret that US stocks have soundly outperformed their global peers for the better part of two decades, meaning that Canadian managers (such as DM) who’ve directed their foreign exposure to American names have been well-rewarded over time. The common answer for why this has occurred is that the US economy is more dynamic than most of the rest of the world and that the S&P 500 is populated with more innovative companies, valuable global brands, and effective management teams than other major markets. While this is true, not all of the S&P’s advantage can be attributed to corporate superiority.

The reason to own a business, whether privately or through the stock market, is to generate sales, profit and, ultimately, excess cash that can be spent or reinvested. And, if one pays a reasonable price for such a company, they will eventually enjoy a favourable return on investment. In the short run, however, public equity performance can often become detached from these fundamental underpinnings, with prices driven instead by investor sentiment and psychology.

As the days begin to shorten and our thoughts turn back to work, or school, or whatever fills our time in the cooler months, some of us will also ponder the onset of the market's most treacherous month.

Prior to the US election and in the weeks leading up to inauguration, Donald Trump repeated both his affection for tariffs and his plan to deport millions of undocumented and, presumably, low wage foreign workers.

If you’ve recently been following US politics – or much of contemporary Americana for that matter – these might not be the first two words that spring to mind…

In the next issue of this commentary, we could very well be talking about a quarterly decline for your equity allocation, and it may be more than just a speed bump.