July 2021 Quarterly Investment Update

Crowds Slowly Building Again

The long-anticipated 2020 Summer Olympics will finally take place starting on July 23 in Tokyo. Crowds around the world are slowly building again as the organizers announced that 60,000 fans will be allowed into Wembley Stadium for the Euro Cup finals in July (Source: The Guardian). Foo Fighters, an American rock band, played to a full-capacity audience at Madison Square Garden on June 2. In a sign of what may be to come, attendees had to show proof of vaccination in order to gain entry to the concert.  

Strong Investment Returns Tempered with Higher Inflation

The value of the businesses in your mutual fund portfolios generally increased over the quarter. In our view, these higher values are to be greeted with caution because at the same time the values of our investments were increasing the prices we pay for things was also increasing. Year-over-year inflation in Canada was 3.6% in May (up from -0.4% a year earlier) and 5% in the United States (Source: Trading Economics, Statistics Canada, U.S. Bureau of Labour Statistics). The US Federal Reserve, who had previously indicated that they would leave interest rates alone until the end of 2024, now suggest that interest rates will be lifted twice in 2023 (Source: Economist).  If our main objective is to maintain and grow purchasing power over time, these inflation numbers remind us that this is not an easy task.

It Pays to be an Owner

Oil prices are up by over 53% since the start of 2021 (Source: Yahoo Canada Finance).  It should come as some consolation for you to know that when we invest in Canada through Canadian equity mutual funds, we benefit from these higher prices through ownership of energy businesses such as Enbridge, TransCanada, Canadian Natural Resources and Suncor.  Another reminder that ownership is a good thing – and potentially takes some of the pain away when the price of gas creeps up above $1.30/litre.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: