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The S&P 500 Index and the S&P TSX index both ended the year 2021 with a robust total return of ~28.7% and ~25.1%, respectively. Underpinned by continued easy monetary policies of the central banks and tailwinds from a reopening economy, companies reported better-than-expected earnings in general which helped investor enthusiasm throughout the year. Fixed Income markets did not share this enthusiasm, however, and the Canadian bond markets declined by ~-2.53% and US bond markets declines by -1.54% over the year. Looking beneath the hood, we estimate that only about 15 of the ~500 companies in the S&P 500 Index and about 11 of the ~250 companies in the S&P TSX Index were responsible for about half the total returns for 2021. (See Charts). Similarly, within the fixed income asset class, inflation protected securities as measured by the Bloomberg US Treasury TIPS 0-5 Years Total Return Index and floating rates loans as measured by the S&P/LSTA Leveraged Loan Index CAD TR Hedged returned ~+5.34% and +5.11% for the year. A few names contributed a major chunk of the index returns in 2021 While we do not think that concentration of market performance alone is enough reason to worry given that the same measure looked even worse at the end of 2020, we do note that one of the reasons that promoted concentration of performance in few areas over the last few years, i.e., low interest rates, is on the brink of change. Several years of accommodative monetary policies and record low interest rates have supported sky-high valuations of several high growth names with promise of earnings farther into the future. Consequently, it is likely that a large chunk of the overvaluation driven by low interest rates is concentrated on the high performing names of the previous years with little to no current earnings. As the economy transitions into a rising interest rate environment, it is reasonable to expect that some of the overvaluation will get taken out in 2022. At the end of October/early November, the Bank of Canada and the US Federal Reserve signaled that interest rate hikes are coming in 2022. The following two months witnessed rotation out of high-growth and high-valuation stocks to value-oriented and high dividend paying stocks. Looking ahead, we think the price action of the last two months of 2021 is a harbinger of things to come in 2022. December in Review The S&P 500 and S&P TSX started the month on a cautious note, however, a bullish sentiment prevailed towards the end as the last trading of the weeks ensured the indices ended the month in green. The concerns on ‘Omicron’, the new variant of Covid-19 virus faded towards the end of the month on reports that the variant was not causing as many hospitalizations as expected. The headline inflation number for November came in at +6.8% for the US. After the Federal Open Market Committee (FOMC) meeting on December 15th, the US Federal Reserve Chair, Jerome Powell, announced that the Fed will double the rate of tapering of its bond buying program with a conclusion of the program coming in March 2022. The FOMC committee projections indicated the committee now expects three, 25-basis point interest rate hikes in 2022. The Canadian government renewed the Bank of Canada’s 2% inflation target, however, added language that gives it flexibility to temporarily overshoot the target to achieve employment objectives. The unemployment rate in Canada declined to 6.0% in November from 6.7% in October, indicating a healthy job market.

After two years of stellar returns, Investors have started asking how long this bull market can last. To add to their nervousness, the media continues to bombard the investment community with reasons to worry. Market jitters were evident on November 26th when the North American markets dropped -2% to -2.5% when news of the Covid-19 virus variant “Omnicron” broke. While news of the latest variant acted as the catalyst, we believe that uneasiness was already palpable in markets for some time. They have been moving sideways for most of the month as investors waited on Biden’s decision regarding the Federal Chair and as expectations increase that persistent inflation will force the Fed’s hand to increase the pace of tapering of its bond buying program. The historically high valuations, high inflation rates, announcements regarding winding down of monetary stimulus, and talks of central banks increasing interest rates in 2022 are all contributing factors to set up for a pullback. As markets do not move in a linear fashion, pullbacks can be common even during bull markets. Such pull backs are typically short-lived and are difficult to time correctly. Thus, the wisdom of “Buy and Hold” and “do not try to time the market” rings true. Often, in trying to time the markets during the short-term pullbacks, investors find themselves selling at the low or waiting too long to get back in for the upside. How does one avoid wealth destruction during prolonged periods of stress? In our view, the key is to know the stage of a business cycle and watch out for signs of the start of a bear market. A pivot to a defensive stance is prudent during bear market as risk assets typically move downwards for a longer period. Below we investigate many of the concerns playing on investors mind today and determine that it is premature to expect a bear market anytime soon. A new variant: The drawdown on November 26th on the news of a new variant “Omicron” that could potentially evade immunity form vaccines was a stark reminder that pandemic is very much ongoing. Current vaccination progress, and the knowledge gained in managing Covid-related risks indicate the economic risks from a new variant, if it spreads, could be mitigated. High inflation and interest rates: The transitory inflation narrative is increasingly being dropped as inflation numbers have consistently surprised to the upside. The current stance of Federal Reserve is that if inflation continues to be more persistent, they have the tools to contain the inflationary pressures, i.e., by increasing interest rates. While a factor, an increase of interest rates and high inflation does not in itself imply the end of a bull market. We highlight periods in history when the Feds increased interest rates, inflation was rising, and S&P 500 index continued to advance (see Chart). Source: Bloomberg Could Fed fast track the timeline to tighten monetary conditions?: As the financial wisdom goes - “Bull markets do not die of old age, they are rather killed by Federal Reserve”. The risk of bear market will arise if the Fed is forced to tighten monetary conditions too quickly, too much, or more than necessary. This in turn will choke the economic activity by making it tough to borrow or service debt and induce an economic recession. Since the US President has nominated ‘Jerome Powell’ for the second term as a chair of US Fed, we think the choice is made for stability and policy continuity. Given Mr. Powell’s track record in the position and his reputation as a dove (preference to keep monetary conditions loose), we think it is reasonable to expect that the Fed Chair is likely to err on the side of caution and will tolerate a lot of inflation before deciding to increase interest rates. That said, persistently high inflation could force the Fed’s hand and thus it is a risk worth monitoring. High Valuations: As a result of record low interest rates, money printing, and fiscal stimulus the asset values are at their historic highs. One implication of high valuation is that the expectations of future returns are low. As high growth is now priced in the valuation, another implication is that one can expect relatively higher volatility as investors’ expectations of a growth outlook can change with the ebb and flow of developments such as a new variant, inflation, or a potential increase in interest rates. Given that the GDP is forecasted to continue to grow in 2022, that unemployment is on a consistent decline, and that consumer demand is strong, we infer that the economy is in healthy spot overall. Eventually, the economy will go through its cycle of expansion and contraction and stocks markets will go through their cycle of bull and bear market; however, from where we stand today, the economic data does not indicate a contraction and/or a bear market soon. November in Review The S&P 500 and S&P TSX advanced for most of the month but gave up their gains towards the end of the month on concerns of a new variant of Covid-19 virus and policy uncertainty on commencement of interest rates hike cycle. As a part of his economic agenda, US President Joe Biden signed a US$1.2 trillion infrastructure bill into law in early November. The bill outlines ~US$550 billion of investments in infrastructure over five years. US Fed Chair, Jerome Powell was selected for a second four year-term and governor Lael Brainard was appointed as a vice chair of the US Federal Reserve The headline inflation number for October came in at 6.2% for the US. The corresponding number for Canada was 4.7% Early in the month, the US federal Reserve released its policy statement and announced commencement of its tapering of bond buying program late in November 2021 Late in the month, while speaking in front the Senate Banking Committee, Jerome Powell said that its is now time to drop the word transitory for inflation and consider accelerating the pace of tapering the Bond buying program. Canada’s GDP for the third quarter was stronger than expected at +5.4% (expectations of +3.0%) underpinned by household spending.

The North American stock markets levelled out during the month of October after a tumultuous September as investors digested several pivots over the last month. Amid persistent inflation, Central Banks across the globe have started to lean towards tightening monetary policy earlier than previously expected. This is coinciding with softer GDP growth prints after economic growth peaked during the second quarter of 2021. A slow growing GDP put together with persistent high inflation has flamed worries of ‘Stagflation’ in the minds of investors and many economists alike. Google Trends shows that interest in the word “Stagflation” spiked during the month of October. (see Chart 1). Stagflation is a period when economic growth stagnates while inflation is high. It is considered a period of unease because stagnant economic growth leads to rise in unemployment while high inflation simultaneously leads to loss of purchasing power. While it is prudent to monitor the concerns on investors minds, it is important to note that the current conditions do not meet the definition of stagflation. There is currently a labour shortage while jobs are plentiful, leaving the unemployment outlook set to continue to decline from current levels. Supply-chain bottlenecks amid robust demand explain part of the high inflation. This suggests that inflation should cool off from current levels as these bottlenecks are taken care off. Further, the weaning off the economy from the sugar high of stimulus packages isn’t equivalent of economic stagnation. Chart 1. Interest in the word “Stagflation” spiked during October 2021 Source: Google Trends Note: Numbers represent search interest relative to the highest point on the chart for the given region and time. A value of 100 is the peak popularity for the term. A value of 50 means that the term is half as popular. A score of 0 means there was not enough data for this term. October in Review The North American stock markets roared back after a tumultuous September with S&P 500 advancing by ~6.9% and S&P TSX by ~4.8% during the month. The Bank of Canada announced termination of its bond buying program and signaled a potential lift off in interest rates starting in the middle quarters of 2022. The US Federal reserve is due to release its monetary policy statement on 3rd November 2021 and is widely expected to announce commencement of tapering of its bond buying program. During the month, bond yields witnessed a sharp increase on both sides of border amid bets of tightening of monetary policy For the month of September (released in October), the inflation number was at 5.4% for the US (as per Bureau of Labor Statistics) and 4.4% for Canada (as per Statistics Canada). The Canada GDP grew at ~0.4% in August (as per as per Statistics Canada) vs. expected ~0.7% and US GDP grew at ~2.0% in the third quarter (as per Bureau of Economic Analysis) vs. expected ~2.6%. According to Bloomberg’s survey of economists, the GDP growth forecasts for 2021 for the US came down from 6.6% in June to 5.7% in October. The corresponding figures for Canada stood at 6.2% in June and 5.0% in October. As per Bloomberg data, during the third-quarter earnings season so far, about 82% of companies in S&P 500 index and ~ 60% of the companies in the S&P TSX index have reported better-than-expected earnings. How does this affect my investments? The stock markets are inherently volatile and short-term market movements are impossible to predict. Historically, market declines have been followed by recoveries and new highs. By staying invested in a diversified portfolio, your portfolio will be well positioned to benefit from a recovery while mitigating the volatility experienced during the period.

On September 28th, 2021, the US Federal Reserve Chairman, Jerome Powell, faced his most hostile hearing to date, in front of Congress, since his appointment in February 2018. The Chairman’s term expires on February 5th, 2022, and he is widely expected to be renominated for a second four-year term. However, his prospects, while still strong, seem to have diminished lately as more opposition from the Senate comes forward. (See Chart below) A democratic Senator, Elizabeth Warren, went on the record to say, “Over and over, you have acted to make our banking system less safe and that makes you a dangerous man to head up the Fed, and that’s why I will oppose your renomination”. She was referring to the fact that Powell has modified the rules that were enacted to make the Banking system more robust after the 2008 financial crisis. It is noteworthy that former congressmen Barney Frank and Chris Dodd, who drafted the Dodd-Frank act to tighten the bank rules in response to the 2008 crisis have endorsed renomination of Jerome Powell as a Fed chair for another term. Source: https://www.predictit.org/ Note: Methodology - market quote of the candidate as a % of sum of total candidate quotes. Stock markets have come to love Jerome Powell as he was the architect of a massive stimulatory response to help the economy rise out of challenges posed by the pandemic. Furthermore, markets have realised that with him at the helm as a Fed chair, they can expect pacifying messages to soothe market nerves even as the economic data begins to point to challenges ahead. While we can agree that inflation is the single most important risk facing the markets at present, given a reading consistently more than 5% since May 2021, we think wiring the policy response to inflation is even more important from a stock market perspective and Mr. Powell has learned to do this job extremely well. As a case in point, the median Fed dot plot in June 2021 indicated no interest rate hikes in 2022 and two interest rate hikes in 2023. The data during last 3 months was strong enough to sway median dot plot in September 2021 to indicate one interest rate hike in 2022 and three in 2023. The Fed also indicated it could start tapering of its bond buying program soon. While bond markets reacted to the hawkish shift by pushing the US 10yr bond yields up by ~20 bps between 22nd September and 30th September, the stock markets’ immediate reaction was positive as Powell insisted that the tapering timeline should not be seen as linked to the timeline of an increase in interest rates. Markets hate uncertainty and with any uncertainty of continuation of Jerome Powell’s as a Fed chair, the risk of policy uncertainty is increased. It was no surprise that the day he was termed “a dangerous man”, stock markets fell by ~2%. September in Review The stock markets gave back some of their year-to-date returns with S&P 500 falling by ~4.9% and S&P TSX falling by ~2.6% during the month. As per Bloomberg’s September economic survey, economists expect Canada’s GDP to grow at ~4% in 2022 and one interest rate hike by Bank of Canada in 2022. Canada concluded its snap election with the new house of commons looking pretty much same as the old. The cryptocurrency market suffered a setback as China’s central bank said that all cryptocurrency related transactions are illegal. Global stock markets witnessed sharp sell off in the middle of the month after concerns arose that Evergrande Group, a China based property developer, might default on its interest payments and lead to a contagion in global credit markets. The diplomatic crisis between US, China and Canada culminated in a sudden resolution after Meng Wanzhou, the Huawei executive, struck a deferred prosecution agreement with the US authorities paving way for her release from house arrest. Shortly after, the two Michaels also boarded plane to return to Canada Treasury Secretary Janet Yellen and Fed Chair Jerome Powell both emphasized that the consequences of not raising the debt ceiling would be catastrophic and treasury will run out of cash around 18 October. In a survey of Bloomberg Economists, the third-quarter US GDP growth was lowered to a 5.0% annualized rate, down from a previous estimate of 7.0% driven by resurgence of Covid-19. How does this affect my investments? The stock markets are inherently volatile and short-term market movements are impossible to predict. Historically, market declines have been followed by recoveries and new highs. By staying invested in a diversified portfolio, your portfolio will be well positioned to benefit from a recovery while mitigating the volatility experienced during the period.

“There are decades when nothing happens; and there are weeks when decades happen” – Vladimir Llyich Lenin. Almost a century after the above words were declared, global developments during the last few weeks suggest that they still ring true. Hopes of a truce between Ukraine and Russia seem low as the war continues. The details that have emerged from the negotiations suggest that no real progress has been made. Nevertheless, the short-term impact of war on the North American and European equity markets has been completely reversed. As of April 1st, 2022, the S&P 500 Index is up by ~+7.7%, the S&P TSX Index is up by ~+6.2%, and the STOXX Europe 600 index is up by ~+1.6% since the start of the Russian invasion of Ukraine in February. The story is different for the first quarter of 2022 where except for the Canadian Index (S&P TSX), which was up by ~+3.8%, the US and European indices (S&P 500 Index and STOXX Europe 600 Index) are down by -5.9% and -4.60%, respectively. The price action indicates the narratives of inflation and the start of an interest rate hike cycle by the central banks that have been more relevant to the financial markets. The short-term impact of war might be limited, however, the trends that have been set in motion are sure to dictate the trajectory of financial markets in the years to come. For instance – it is certain that Europe will have to invest substantially to reduce/eliminate its dependency on Russian energy imports. While Europe is likely to embrace sustainable forms of energy, fossil fuels will also play an important role as Europe will need readily available sources to achieve their energy needs. This implies an increase in capital expenditures and a higher inflation rate related to higher energy costs. The Western countries will also need to increase their capital expenditure on military equipment and preparedness. Ukraine and Russia together account for ~25% of the world’s wheat production. Wheat prices have risen since the start of the war as supplies have been disrupted. Russia is a large exporter of fertilizers. If the World decides to force sanctions or seek to sever ties with Russia, this could mean more food inflation. Since all this is coming to pass at a time when inflation is already running hot and supply chains are still fractured by the pandemic, Central Banks looking to tighten monetary policies to tame inflation have a challenging task ahead. In March, the Bank of Canada and the US Federal reserve started the interest rate hike cycle by increasing the policy rates by 25 basis points. With inflation in Canada at 5.7% and in the US at 7.9%, market participants are now expecting the Central Banks to accelerate the pace of rate hikes with another 6 to 8 increases of 25 basis points each over the remainder of the year. The challenge for Central Banks is to determine the neutral policy rate, i.e., the rate at which interest rates are not too low to further add inflationary pressures and not too high to curb economic growth. The price action in bond markets suggests bond markets are expecting a policy error that could lead to an economic recession. As of April 1st, the most-watched section of the US yield curve (2-year-10-year) has inverted, i.e., the yield on a 2-year treasury is higher than the yield on a 10-year treasury. While the usefulness of an inverted yield curve in predicting a recession is often debated due to potential false positives, historically, an inversion of a yield curve has often preceded an economic recession by ~18-24 months (see chart). Chart 1. US Yield Curve 2Y-10Y spread and US Recession Source: Bloomberg On the other hand, despite some jitters, equity markets have remained overall relatively resilient. Given that equity markets typically peak 3 to 6 months before the actual recession hits, and corporate earnings expectations have yet to show any sign of weakness, we think it is too early to look negatively at equities. Nevertheless, as a hedge against the rising interest rate environment and the increasing uncertainty, we think it is prudent to increase allocation to the low assets in a portfolio. The fixed income asset class could stage a rally in the near term after producing a year-to-date decline of approximately 6% to 7%, however, high inflation and rising interest rates indicate that the outlook remains challenging. Looking ahead, we think that increasing exposure to select pockets of markets with a skew towards high quality, low valuation, and low duration assets is the best way forward.

In general, April is considered a strong month in the markets. Since 1970, April performance of the S&P 500 Index has yielded positive price returns ~70% of the time and the S&P TSX Index has yielded positive price returns ~60% of the time. April 2022, however, struggled as the S&P 500 Index and the S&P TSX Index price returns came in at ~-8.7% and ~-5.2%, respectively. As of April 30th, the drawdown of ~13.31% showing on the S&P 500 is most like the decline of -11.45% in 1970 (Chart 1). Comparatively, the S&P TSX Index fared better with a price decline of -2.17%. The drawdown in bond markets also set records with measures of aggregate bond markets declining by ~9.9% in the US and ~9.5% in Canada. These are the worst recorded declines since 1976 for the US (The Bloomberg US Aggregate Bond Index) and since 2002 for Canada (Bloomberg Canada Aggregate Total Return Index Unhedged CAD) (See Chart 2). Chart 1 S&P 500 Index and S&P TSX Performance (January to April) Source: Bloomberg Chart 2 US and Canada - Aggregate Bond Market Performance (January-to-April) Source: Bloomberg In April, bond markets continued to aggressively price against expectations of large interest rate hikes. The 10-year bond yields jumped by ~60 basis points in the US and by ~46 basis points in Canada after inflation numbers came ahead of expectations at +8.5% in the US and +6.7% in Canada. The reaction from bond markets indicates that the fixed income traders believe that Central Banks are behind the curve on controlling inflation, and therefore, will be forced to slam the brakes on the economy by delivering high interest rate hikes at a faster rate. On the other hand, equity market investors seemed to have taken a relatively benign view of the inflation narrative, up until a couple of developments later in the month. First, a report* on April 20 showed inflation in Canada blew past expectations. Second, the US Fed Chair, Jerome Powell, stated on April 21, that front-loading rate hikes by increasing interest rates by 50 basis points in May would be appropriate. The above developments were followed by comments from certain Fed officials indicating the prospect of a supersized 75 basis points could also be entertained. The volatility in equity markets was exacerbated during the last two weeks of the month as the above developments provided fuel to the narrative that inflation is becoming more persistent. Also, the Central banks have been pushed into a corner where the only way out of the situation is to aggressively hike interest rates which may lead the economy towards a recession. While equity markets are always dealing with some form of uncertainty, the factors mentioned below make the current situation somewhat unique: The war in Ukraine is at a point where no simple solution is in sight. The prospects of a ban on Russian energy supplies and the extent of its impact on the European economy. Incremental inflationary pressures as China, the World’s manufacturing factory, locks down again to deal with the threat of a new wave of Covid-19. The unprecedented stimulus measures during the pandemic and the subsequent impact of its unwinding. We believe that all the above factors could influence inflation and thus the inflation narrative is the most important variable to watch. The unpredictability of the above factors lies in estimating the extent of their contribution to inflationary pressures and the Central Banks’ policy response. Thus far, the equity markets’ reaction is aligning with historical precedence where equity markets initially look for direction (expressed with an increase in volatility) at the start of the interest rate hikes cycle and then realign and adjust after the policy path becomes clear. Since the policy path is dependent upon the inflation trajectory, equity market volatility may be here to stay until the inflation rate starts to level off or even better, soften in the coming months. As supply chain pressures ease and the World economy moves forward, a shift in consumer spending from goods to services suggests such a scenario is not impossible. *Statistics Canada

Dear Client, We hope you are enjoying the last moments of summer. As restrictions continue to list and with students returning to school, it feels as though life is returning to “normal” in Canada. As per the COVID-19 Tracker data, ~73.05% of the population in Ontario has received at least one dose and ~67.1% of the population is fully vaccinated. Overall Canada's numbers are similar at ~73.06 of the total population having received at least one dose and ~66.36% being fully vaccinated. By contrast, the number for the US stands at ~61.6% of the total population with one dose and ~52.3% of the total population being fully vaccinated as per data from the Centre for Disease Control and Prevention (CDC). Over the last one-month period, the 7-day average daily infection cases for Canada increased from ~692 per day to ~3k per day and the 7-day average daily infection cases for the US have increased from ~83k to ~135k per day, as of this writing. Despite increasing infection rates, Epidemiologists believe the latest wave will not be as worrisome as previous ones due to improving vaccination rates. The investor skepticism around second-quarter earnings season, China’s crackdown on its technology companies, and the news flow on the spread of the contagious Delta variant of Covid -19 kept the stock markets volatile for most of the month. Investor enthusiasm returned towards the end of the month as the Feds continued with its moderate tone and corporate earnings fared better than expected. Macroeconomic and market developments: In August, the S&P 500 index and S&P TSX traded higher; led by the Information technology, the Financials, and the Communications sectors. The Energy sector lagged on both sides of the border while the decline in the Materials sector dragged the S&P TSX ensuring the S&P 500 index performed better than the S&P TSX for the month. As per Bloomberg data (as of Aug 30th), for the second quarter of 2021, ~83% of the S&P 500 companies reported better-than-expected revenues and ~86% reported better-than-expected earnings. For TSX, ~65% of companies beat on revenues and ~60% of the companies beat on earnings. The Chinese stocks listed in the US faced severe selling pressure after the country’s administration issued rules to prevent unfair online competition and indicated it will increase scrutiny across various industries to protect consumers. The economic data released by the Bureau of Labor Statistics in the US indicated that inflation was flat at 5.4% in July while the unemployment rate dropped to 5.4% in July from 5.9% in June. The corresponding figures for Canada were inflation climbing from 3.7% in July to 3.1% in June and the unemployment rate declining from 7.8% in June to 7.5% in July as per Statistics Canada. The US 10-yr government bond yields advanced by ~6.5 basis points since the start of the month, while the Canadian 10-yr bond yields declined by ~1.5 basis points. The US Federal Reserve Chairman, Jerome Powell, said that the central bank could start reducing their monthly bond purchases this year, however, they would not be in a hurry to increase interest rates. How does this affect my investments?

Dear Client, We hope that your family remains safe and well. Please find below a summary of the latest market developments. Market developments North American equity markets proved volatile this week, reacting to increasing numbers of COVID-19 infections in 27 states and fears of new lockdowns and decreased economic activity. In particular, cases continued to soar in Florida, Texas, Arizona and California. The International Monetary Fund (IMF) now expects global economic output to contract by 4.9% in 2020, with U.S. output contracting by 8.0% and Canadian output by 8.4%. Ratings agency Fitch Ratings downgraded Canada's credit rating to 'AA+' from 'AAA' to reflect the deterioration of public finances due to COVID-19. New Bank of Canada Governor Tiff Macklem said that Canada’s economy will take a long time to fully recover from lockdowns, requiring the central bank to continue purchasing government bonds to keep interest rates low indefinitely. President Donald Trump said that a second stimulus bill was coming and would likely be announced in the next few weeks. Weekly jobless claims in the U.S. were 1.48 million, and real gross domestic product (GDP) contracted at an annual rate of 5.0% in the first quarter of 2020. How does this affect my investments? A resurgence of COVID-19 cases across the United States has caused investors to consider the implications of a second series of lockdowns; something many hoped would be unnecessary moving forward. As economic forecasts continue to show the damage caused by the pandemic, it is understandable that sentiment may turn bearish in the short term. With that said, staying on track with your long-term plan ultimately proved wise and our advice is to continue to do so. The chart below illustrates this point, demonstrating that often when investors turn increasingly bearish (moved by fear and pessimism), markets may be poised to move the other way. We are always happy to discuss your investment plans. Please do not hesitate to contact us at (613) 258-1997. Sincerely, O’Farrell Wealth & Estate Planning team Sources: CI Investments Inc., marketwatch.com, fxstreet.com, theglobeandmail.com, fitchratings.com, bostonglobe.com, and forbes.com. IMPORTANT DISCLAIMERS This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.

We hope that all is well with you and your family as we enjoy warmer weather and experience the gradual easing of lockdown restrictions. Below you will find a summary of what has taken place in the economy and markets in recent weeks, as well as some additional thoughts. Market developments North American markets moved higher this week, propelled by U.S. Federal Reserve (“the Fed”) Chairman Jerome Powell’s comments that the Fed was “not out of ammunition by a long shot” and not to bet against the U.S. economy in the medium or long run. Market optimism was also buoyed by positive results from Moderna’s COVID-19 vaccine phase 1 clinical trial. The Canadian government announced expanded eligibility for emergency business loans to include businesses that have filed either a 2018 or 2019 tax return and have expenses between $40,000 and $1.5 million per year. Canada’s consumer price index was down 0.2% year-over-year, the first such decline since September 2009. The U.S. Census Bureau announced that housing starts in April were 29.7% below the April 2019 rate, a negative but expected sign for the economy. Weekly jobless claims were 2.438 million, bringing the cumulative nine-week tally to 38.6 million. The price of U.S. oil reached two-month highs as lockdown restrictions eased even further in much of the world and supply continued to decrease. How does this affect my investments? The markets have continued to rebound in the face of a great deal of uncertainty related to both the progress of the pandemic and the prospects for an economic recovery, further demonstrating the risk of attempting to time your investments based on short-term reactions. Much of this week’s optimism appears to have been fostered by the potential for both a vaccine and additional government stimulus. Whether reality will live up to this potential on either front has yet to be seen, which is why your investment plan does not depend on it. Considering the news that continues to come out, including continued re-openings and poor economic data, the markets have both positive and negative indicators to choose from. As we have seen lately, they may alternate their focus from week to week, even when the news does not appear to be relevant. Therefore, we advise you to stay informed but to stick with your long-term plan. This allows you to remain unaffected by the market’s week-to-week fluctuations. As always, we are happy to discuss your investment plans. Please do not hesitate to contact us at (877) 899-1997. Sincerely, O’Farrell Wealth & Estate Planning Sources: CI Investments Inc., nbcnews.com, cnbc.com, reuters.com and ctvnews.com IMPORTANT DISCLAIMERS This material is provided for general information and is subject to change without notice. Every effort has been made to compile this material from reliable sources however no warranty can be made as to its accuracy or completeness. Before acting on any of the above, please make sure to see a professional advisor for individual financial advice based on your personal circumstances. Assante Capital Management Ltd. is a Member of the Canadian Investor Protection Fund and Investment Industry Regulatory Organization of Canada.

O’Farrell Wealth & Estate Planning works in partnership with Assante Wealth Management to offer a full range of investment solutions. The creation of our wealth management team ensures we are delivering suitable financial solutions in the developing investment landscape. The wealth management team actively monitors the markets to identify investment opportunities for our client’s portfolios. This team works closely with our advisors to develop tailor-made solutions to meet your retirement goals. Our objective is to keep our clients informed on the latest market developments and provide some perspective on the major themes we see in the economy. COVID-19 Update Two of the world’s biggest virus hotspots, Italy and Spain, have shown a decrease in the number of daily new virus cases after two-to-four weeks of strict lockdown measures. While the return to normalcy may still be far away, the progress seen in these countries in bringing the pandemic under control is encouraging. A vaccine for COVID-19 continues to be researched. There is an interesting study on a Tuberculosis vaccine (BCG) that demonstrates that those who have been inoculated with BCG vaccine are six times less likely to contract COVID-19. The BCG vaccine has other promising effects such as reducing respiratory illness and boosting the immune system. Countries with mandatory BCG vaccinations have had much less impact from the virus in comparison to countries where this vaccination is voluntary. This study is promising as the safety profile of the BCG vaccine is well established and some production capacity is already in place. Subject to the positive outcome of trials, this could be a potent addition to the arsenal of drugs available to healthcare providers to manage COVID-19 until a targeted vaccine is developed. If you are interested in reading the study, the link can be found below. With Global coronavirus cases increasing from ~1 million to ~3.26 million (as of this writing); the month of April is shaping up to be the worst month this year for economic activity and the disruption of day to day life. Nevertheless, evidence from countries that have successfully flattened the curve indicate there is light at the end of the tunnel. The Collapse of Oil The month of April saw oil prices collapse to new lows as a result of a disagreement between OPEC+ members Saudi Arabia and Russia on reducing their oil production amidst the coronavirus pandemic. Russia’s refusal to cut production lead to Saudi Arabia flooding the market with an oversupply of oil, placing downward pressure on prices. In an attempt to support the price of oil, the US administration extended production cuts to assist OPEC+ in finding a solution to their ongoing feud. As of last week, OPEC+ has come to an agreement to reduce production by 9.7 million barrels a day beginning in May, while a deal was made with the US to cut production by ~300,000 barrels per day. After an initial positive reaction, oil gains had reverted as the proposed production cuts did not seem to be enough to offset the expected demand decline due to the pandemic. The dislocation in oil prices took an extreme turn on April 20th when crude oil contracts traded at -$38 per barrel largely due to storage capacity limitations. This situation has since resolved with WTI crude oil trading at ~$19.12 as of this writing. Market Update (as of April 30th, 2020) As always, thank you for your referrals this month! They are always handled with great care and discretion. “Is Global BCG Vaccination Coverage Relevant To The Progression Of SARS-CoV-2 Pandemic?” Link: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7136957/ ) Contact Us Phone: 877-989-1997 Email: hsmith@assante.com