Cardinal Quarterly – April 2021

MARKET OUTLOOK – Markets are off to a good start in 2021. Although most developed market indices have already achieved high single-digit returns in the first quarter, we believe there is still room to run higher in 2021. In fact, we cannot recall a year when so many factors were aligned for explosive GDP growth. Stimulus spending has remained at record highs, interest rates are near record lows, and consumers sitting on record savings are full of pent-up demand.

Click here to read more:  Cardinal Quarterly – April 2021

DM Monthly Report – Mar 2021

PRUDENTIAL PAYBACK – Like just about everyone else at this time last year, Canada’s banks were justifiably concerned about what the unfolding pandemic would mean for their economic futures. How would mortgage books be impacted by surging unemployment and a potential chill across the real estate market? Where would the explosion of the government’s balance sheet send interest rates? Would ordinarily reliable wealth management and brokerage revenues plunge if investors became locked in a state of inactivity? Against this uncertain backdrop, the management teams of the big 5 banks sharply increased provisions for credit losses, while the Office of the Superintendent of Financial Institutions put a freeze on share buybacks and dividend increases.

As it turned out, the scale and swiftness of government programs, such as CERB, filled the economic chasm created by the lockdown and the principal worries hanging over the banks never came to pass.

Click here to read more:  DM Monthly Report – March 2021

Cardinal Update – March 2021

THE BANKING BOUNCE-BACK – Since the first vaccination approval was announced by Pfizer-BioNTech on November 9, 2020, the Canadian banks and U.S. banks held in the Cardinal portfolios have tracked an average return of ~27% and ~50% as compared to the total returns of the S&P/TSX at ~12% and the S&P500 at only ~8%. 

What has led to the banks’ comeback and what drivers keep us confident in the space? The most apparent driver of the strong returns from the sector is the vaccination news itself which signals a hopeful beginning of the end to the current COVID-19 health crisis. With an end to the pandemic comes expectations of renewed economic growth of which banks are historically strong participants in the early cycle recovery through lending growth and capital markets activity.

Click here to read more:  Cardinal Update – March 2021

DM Monthly Report – Feb 2021

The Stock Market is Dangerously Expensive – OR IS IT? – The market’s almost unrelenting ascent from its spring 2020 low has raised concern that stock prices have become precariously disconnected from fundamentals and are being buoyed primarily by the tsunami of liquidity unleashed by fiscal and monetary authorities. To be sure, the S&P 500 has rarely been as expensive as it is right now when judged by the commonly referenced price/earnings ratio; if cash flow is used as the yardstick, though, equity valuation doesn’t appear to be particularly stretched against where it’s tended to reside over the past 30 years.

Click here to read more:  DM Monthly Report – Feb 2021