Mackenzie Minute: July 27, 2018
Hussein Sunderji, Vice President, Mackenzie Ivy Team, weighs in on the trade conflict, how it may impact Q2 and Q3 results and the pockets of opportunity in a volatile market.
HUSSEIN SUNDERJI : The trade conflicts between the U.S. and several of its trading partners, including China and Canada, have been quite topical of late. The U.S. has already implemented tariffs on select products and countries and they are threatening to expand that list. Meanwhile, some of its trading partners have retaliated and imposed tariffs of their own against the U.S. So it's hard to know exactly how this is going to play out, but what we have seen it that Asian equity markets have weakened considerably over the last several weeks in response to some of these concerns.
We are not focused on any one specific event to occur, but there are a number of things we are monitoring and the first of those is continued normalization of monetary policy so the impact of slowly rising interest rates and the unwinding of quantitative easing on asset prices and equity market volatility and even the financial performance of specific companies. And secondly, we will continue to monitor the trade situation and we may get a better glimpse into whether or not company fundamentals will actually be impacted by the escalating tensions when companies start to report Q2 results over the next few weeks and then Q3 results in the fall.
Currently, many of the Ivy funds do have a high cash rate but that's because we continue to believe that equity market valuations, broadly speaking, are still quite expensive, especially for high quality growing companies. But we are seeing pockets of opportunity; recently there were opportunities in the consumer staples sector and currently we are seeing opportunities in Asia but more so with cyclical or economically sensitive businesses. We will continue to be patient and try to take advantage of equity market volatility, but still be disciplined when it comes to valuation and quality.