I am careful to contemplate that at Halloween, the notion of trick or treat may be going through your minds as you read this article. If you have been watching the news lately and especially the performance of our Prime Minister and his government, his carbon tax strategy truly is a “Trick” (it is not a tax on carbon, it is a price on pollution) and his “Treat” is to take your money, then give it back to you as a rebate.

We have a government that is oblivious to what matters most to the average Canadian. They believe the three main concerns to all Canadians are:

• Carbon Tax
• Gender neutrality
• Aboriginal rights

These are valid concerns and issues that need to be explored and addressed respectfully but I feel the three top concerns for Canadians are:

• The Economy
• Healthcare
• Taxes

A recent study by the Fraser Institute in Ontario, that government sector employees earn 10.6% more than private sector employees for similar work.^[1] They retire 1.8 years before private sector employees, take 5 more personal days off work a year, 5 times less likely to be laid off, and 7 times more likely to have guaranteed pensions for life.

My question to you is this, if public sector employees made less, and more importantly, had no guaranteed pensions, do you think that they who drive policy would not push for better taxation policies that allows capital formation for retirement? Of course they would, but as we say in the private equity world, senior bureaucrats have “no skin in the game or investor alignment” so they will continue to increase taxes to guarantee government revenues for their gold-plated pensions. Case in point, the government just released its 2017 / 2018 fall annual financial report that states it increased revenue by a whopping $20 billion over targets thanks largely to half of that money coming from additional revenues through income tax.[2]

TriView Capital, an Exempt Market Dealer registered in Western Canada and Ontario, will be conducting education seminars across Western Canada starting November 8^th in Vancouver, November 13^th in Victoria and November 14^th & 15^th in Calgary. They will show you two investment strategies that help support more than a million private sector jobs (economy), new drugs and patents to help reduce costs and improve patient lives (healthcare), and use federal and provincial tax deductions / credits to maximize your tax savings this season (taxes). Seating is limited. Please go to www.triviewcapital.com/events/ to register for these upcoming education seminars that will reinforce the idea that “it’s not how much you make but how much you keep”.

Craig Burrows

President & CEO, Tri View Capital Ltd.

[1] https://www.fraserinstitute.org/studies/comparing-government-and-private-sector-compensation-in-ontario-2018

2 https://nationalpost.com/news/politics/john-ivison-federal-liberals-stumbled-into-a-20b-windfall-then-they-spent-it-all

Disclaimer: This communication is for information purposes only and is not, and under no circumstances to be construed as an invitation to make an investment in any securities, nor does it constitute a public offering to sell securities or any other products described herein.

“Everyone wants happiness. No one wants pain. But you can’t have a rainbow, without a little rain.” ― Anonymous

Global stock markets are in the midst of a pullback and corrections never feel good. In the short-term, investor sentiment can swing wildly, causing volatility in the markets. Psychology is an important part of investing and we can often be our own worst enemy in making sub-optimal decisions in times of volatility. This is due to the natural wiring in our brains, where fear triggers a flight instinct. Our brains also have a tendency to project recent trends into the future (recency bias), which collectively, can cause crowd sentiment to hit extremes. For long-term investors, empirical data and experience have shown that times of pessimism often present opportunities.

The current market pullback was triggered over fears of a prolonged trade war between the U.S. and China (tariffs), rising bond yields (tighter financial conditions), faster U.S. interest rate hikes (hawkish U.S. Federal Reserve) and so on. These factors can lead to slower global economic growth over time. As sentiment soured, selling in highly crowded trades, such as the FAANG (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) stocks added fuel to the fire.

As of writing, North American markets are off 8-10% from their summer peaks and international developed markets (ex-Canada & U.S.) are off about 18% from their peaks. Markets are attempting to put together a short-term bounce, but the bounce has been weak thus far. This leads us to think that this pullback could go lower for longer. Some markets (such as S&P500, TSX, Japan) are trading at or near first support levels now, but if those supports are violated, markets could go lower from current levels.
The reason why your portfolios hold different asset classes is to provide negative correlation and it is during these times of stress that bonds and gold shine and the cash reserve provides dry powder to capture opportunities.

Longer term, stock valuation is mainly driven by corporate earnings and dividends. The earnings season is underway, and thus far, we are seeing strong corporate earnings (second best quarter in a decade). Companies in both the S&P 500 andTSX Composite are showing positive revenue growth (top line) and earnings growth (bottom line). Furthermore, corporate stock buyback programs are set to restart this quarter and are expected to provide support for the markets. Overall, economic data and indicators, such as consumer spending and business investments, suggest that this is still a healthy market pullback in the context of a late-cycle, bull market. We expect to see rotation into value and defensive sectors like health care and consumer staples as the cycle continues. The key to sound investing is to remain focused on the long-term horizon as short-term market volatility is inevitable and is part of investing.

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