Christine Poole, CEO and managing director at GlobeInvest Capital Management

FOCUS: North American large-cap stocks

MARKET OUTLOOK:

Equity markets are recalibrating to higher interest rates and valuation multiples are compressing. Inflationary pressures due to supply shocks resulting from the pandemic and war in Ukraine have likely peaked, however the path towards a more normalized level will take longer to unfold. China’s zero-tolerance COVID-19 policy is also impeding the resolution of supply chain bottlenecks and is disruptive to general business activity.

The U.S. Fed hopes to tame inflation through interest rate increases and quantitative tightening while keeping unemployment steady and avoiding a recession. While history shows that a soft landing is difficult to achieve, it is premature to draw any conclusions.

Corporations have offset higher input costs through raising prices and productivity initiatives. With the exception of “pandemic-induced businesses,” inventories are low and demand is outstripping supply which is supportive for future growth. Steady profit growth will eventually be supportive for share prices.

Households and businesses in the U.S. are in sound financial shape owing to accommodative monetary and fiscal policy over the past two years. This underlying strength combined with a healthy job situation is helping to absorb the dual headwinds of higher interest rates and prices for goods and services. Nonetheless, the absence of fiscal and monetary stimulus means economic growth will moderate.

Against a backdrop of rising interest rates, inflationary pressures, slowing economic growth, and valuation multiple contraction, our basic tenant to invest in financially strong profitable companies that have industry tailwinds and pricing power at reasonable prices remains intact.

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TOP PICKS:

Brookfield Asset Management (BAM.A TSX)

Recent purchase price $59 range in May 2022

Brookfield Asset Management is a global alternative asset manager with over $700 billion in assets under management. The company owns and operates assets on behalf of shareholders and clients with a focus on property, renewables, infrastructure, private equity, and credit. The stock offers a dividend yield of 1.2 per cent.

Visa (V NYSE)

Recent purchase price $192 range in May 2022

Visa is a global payments technology company, operating the world’s largest retail electronic payments network and providing financial institutions with a broad range of platforms for consumer credit, debit, and prepaid payments. Visa benefits from the ongoing global secular shift from cash/cheque to card-based and electronic digital payments. Visa is also a natural beneficiary in the growth of e-commerce/online retail spending. Visa offers a dividend yield of 0.8 per cent.

WSP Global (WSP TSX)

Recent purchase price $133 range in May 2022

WSP Global provides engineering and design services to clients in the earth & environment industry, transportation & infrastructure, property & buildings, resources, power & energy. Through strategic acquisitions, WSP has expanded its global presence with Canada representing 17 per cent of revenues, Europe/ME/India/Africa 32 per cent, Americas 34 per cent, and Asia Pacific 17 per cent. WSP is committed to its proven growth strategy of being a consolidator within a fragmented industry, continuous margin improvement and growing organically while maintaining a strong balance sheet. WSP offers a dividend yield of 1.1 per cent.