Roberts Nash Advisory Group

Never Cut What You Can Untie

Martin Lefebvre, CIO and Stategist

As we look at most financial assets, it seems clear that the last month has been more in "wait and see" mode. Most have been range-bound for a few months now, a situation which also had the effect of lowering realized and implied volatility. It makes us wonder if this is more a result from lack of conviction than outright complacency.

To be fair, there are a lot of unknowns which could affect returns in a material way, most of which are political in nature. On one side the U.S. economy is doing very well and consumer confidence is high. But, some measures such as GDP now are starting to dampen expectations a bit (chart 11). The potential for disappointment in the U.S. is gradually increasing, as it seems the President is unable to fully rally the GOP behind his plans while we believe Europe can potentially surprise to the upside.

True, some political risks exist in that region also, as the French Elections and the Brexit negotiations are sure to make the headlines in the following weeks or months. However, the odds of Le Pen winning are slowly decreasing as Macron is gaining traction. As well, we believe Brexit will take a long time to get sorted out and both the EU and UK have an incentive to reach a deal that will do as little damage as possible. Consequently, we still suggest a neutral exposure to equities, but also reduce our negative bias towards Europe.

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** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **

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