Christine Poole, chief executive officer and managing director at GlobeInvest Capital Management

FOCUS: North American large-cap stocks 

MARKET OUTLOOK:

Drivers behind the rebound in stock markets from mid-June include encouraging inflation data, reasonably solid second-quarter corporate profit reports and assurances from the U.S. Federal Reserve of adhering to a data-dependent approach to judge the pace and magnitude of future rate increases. The sustainability of this rally will ultimately rest on corporate earnings and an appropriate valuation multiple applied to them.

With unemployment at a historical low and inflation unacceptably high, interest rates will continue to move higher to slow overall aggregate demand and dampen longer-term inflation expectations. Supply chain bottlenecks are easing, albeit at a gradual pace. Ongoing improvement will be helpful to resolve the supply and demand imbalances and alleviate upward price pressures. 

The U.S. Treasury yield curve inversion is concerning due to its historical accuracy in predicting a recession. However, if a recession materializes, the lead time from the point of inversion to the start of a recession varies quite widely anywhere from six months to 24 months. At this juncture, the debate between a soft or hard landing remains unresolved.

Investors cannot control the economic cycle. And as history has shown, even the most qualified professionals find it difficult to make accurate economic forecasts. Instead, investors should focus on owning a diversified portfolio of financially strong and profitable companies in attractive businesses. While purchasing at attractive prices is beneficial, borrowing a quote from renowned investor Bill Miller, “It’s time, not timing that leads to building wealth in the stock market.”

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TOP PICKS:

 Brookfield Renewable Partners (BEP.UN TSX)

Recent purchase price $51 range in August 2022

Brookfield Renewable is an international renewable power energy producer with generation assets in hydroelectric, wind and solar. The company’s cash flows are supported by a strong contract profile with 90 per cent of total generation under long-term contracts, and a weighted average remaining contract length of 14 years. With a track record of consistently increasing its distribution, Brookfield Renewable currently provides a yield of 3.3 per cent.

Johnson and Johnson (JNJ NYSE)

Recent purchase price $167 range in August 2022

JNJ is a global diversified healthcare company, manufacturing a broad range of products within three segments; pharmaceuticals (56 per cent of sales), medical devices (29 per cent) and consumer health (15 per cent). Approximately 70 per cent of sales are derived from products that have a number one or number two global share.  JNJ offers consistent stable earnings and dividend growth.  One of a few triple-A-rated companies left in North America, JNJ has increased its dividend for 60 consecutive years and offers investors a dividend yield of 2.7 per cent.

Raytheon Technologies (RTX NYSE)

Recent purchase price of $92 range in August 2022

Raytheon Technologies is a leading aerospace and defence company engaged in providing advanced systems and services for commercial, military and government customers globally. Its product portfolio includes avionics, interiors, aircraft engines, sensor and communication systems and missile defence systems. The commercial businesses will benefit from the ongoing recovery in global air travel. The stock provides a dividend yield of 2.4 per cent.