Jaime Carrasco is director and investment adviser at ScotiaMcleod. His focus is on resource and utilities stocks and REITs.
- Yamana Gold Inc. (YRI TSX)
- Sociedad Quimica y Minera (SQM NYSE)
- Tim Hortons (THI TSX)
Past Picks: August 16, 2013
Goldcorp Inc. (G TSX)
Then: $32.09; Now: $30.79 -4.05%; Total return: -1.73%
Algonquin Power (AQN TSX)
Then: $6.94; Now: $8.16 +17.58%; Total return: +23.13%
Silver Standard (SSO TSX)
Then: $9.48; Now: $10.41 +9.81%; Total return: +9.81%
Total return average: +10.40%
Scotiabank's International Portfolio Advisory Group (IPAG) is recommending a strategy change as we begin to take a defensive stance for the back end of the year with a wait-and-see attitude. We have been reducing our exposure to equities to neutral, fixed income to underweight, and cash to maximum overweight. The main catalyst for this shift is a possible turn in the rate cycle in North America as the Fed has been hinting at ending the QE program some time in the later part of the year, and positioning itself to possible start to increase in rates by the middle of 2015.
PAG – (Portfolio Advisory Group): We prefer a legging out of high yield investments, which have profited substantially from the decreasing interest rate environment that we have been experiencing, and risk adverse investors should consider migrating to cash or near-cash investments. For more bullish investors, we prefer cyclical sectors such as energy and industrial, and growth areas that are more stock-specific such as in the technology and health care sectors.
I continue to focus on the ever-changing global geopolitical issues, as global conflicts continue to engulf bigger and bigger players. While this worsening situation is not conducive to positive economic growth, it should continue to fuel inflation, enhancing my stagflation thesis investment stance. Invest in assets that will benefit from inflation and that are needed for the essentials of lifestyle: agriculture, energy, utilities, pipelines, REITS, as well as precious metals as the ultimate currency. I am also recommending that we put stop-losses to lock in gains, in case of declines in our considerations in these sectors.
Furthermore, I continue to stand behind my belief that sooner or later we will be on the other side of this massive financial hurricane that began in 2008. The core of my conviction comes from the fact that debt levels today are higher than in 2008, and that this fiscal reality has been obfuscated by the Fed's low interest rates policy, which begs one question: how long can this last? Sooner or later rates will have to rise and we will exit the calm winds of the eye of the storm and re-enter the hurricane. My strategy has been to prepare for that inevitable eventuality and position clients to benefit from the inevitable unwinding of global debts.