by Tom Bradley

When you look at your statement, you may be surprised at how well your portfolio has done over the last year. I say that because a year ago things looked bleak. Bonds and stocks were down a lot, interest rates were up, and commentators were calling for a recession.

At that time, we had a different take. I said in my 2^nd Quarter Brief: “I don’t know when markets will bottom but know that I want to own a diverse collection of leading businesses when it does.”

I built on this message in the 3^rd Quarter. “Nobody knows when stocks will find a bottom and start to recover. It could be another 3 to 12 months, or it may have already started. What we know for sure is that most of the money will be made well before the current problems are resolved.”

Since the end of last June, the World Equity Index is up over 20%, reflecting an overly pessimistic starting point and the rise of a small group of technology-related companies. Many Canadian stocks did well too, as evidenced by our Small-Cap Fund, although the market overall was held back by weakness in two big sectors, financials and energy. Mixing in positive returns from fixed income, balanced portfolios at Steadyhand earned a 10-12% return over the past 12 months.

So, where to from here? Unfortunately, we haven’t had that recession yet, at least not a broad-based one, and some of last year’s issues have worsened. Relations with China have deteriorated, the outlook for commercial real estate is darker, and the U.S. banking system has wobbled. And then there’s a new wild card — Artificial Intelligence.

But some factors have improved. Inflation is down meaningfully, supply chains, including energy, have adjusted to the war in Ukraine and the post-pandemic recovery, and the use of technology continues to reduce the cost of doing business.

As I process these cross currents, I find myself in a reflective mood. I’m hitting a rather sobering milestone — 40 years in the investment business. Over that time, I’ve changed or revised my thinking on many things, but one I feel more strongly about than ever is that investors can’t predict what stock prices are going to do over the short to medium term.

In light of this belief, Salman and I endeavour to understand the current situation and then determine where our clients have the best chance of achieving an attractive return over the next 5 years. Our current assessment is:

• Fixed income yields are competitive again and will be a good contributor to portfolios.
  
• Non-tech, non-AI stocks already reflect a difficult economic outlook and are trading at reasonable prices.
  
• Excessive leverage is causing problems for some companies and property owners, and will present opportunities for well-capitalized investors.
  
• We can never be certain enough about the opportunities and risks to be anything but broadly diversified.

On the business front, we continue to build our team to ensure our clients are well looked after. We’re delighted to have Samantha Warszawski join us. We’re also excited to introduce the Steadyhand Retirement Withdrawal Program, a new initiative designed to help retirees draw a steady income from their portfolio. In the meantime, enjoy the great Canadian (hopefully smoke-free) summer.

I encourage you to read the rest of our Q2 Report, where we provide more details on our specific strategies and what we've been doing in each of our funds.

Management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The indicated rates of return are the historical annual total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns.