Christine Poole, CEO and Managing Director of GlobeInvest Capital Management

FOCUS: North American Large Cap Equities

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MARKET OUTLOOK:

Consumer spending is a major source of economic growth. In the United States, consumer spending accounts for more than two-thirds of economic activity, and in most industrialized economies, consumer spending accounts for around 60% of GDP.

Household savings accumulated during the pandemic and a robust employment situation are cushioning the impact of rising prices for goods and services. The apparent shift in the overall consumer portfolio towards products associated with social and travel-related activities means that high prices for household goods are likely behind us. Discounting prices to eliminate excess inventory of unwanted goods should help dampen inflation in the coming months.

The pandemic has likely accelerated consumer bifurcation in North America. White-collar jobs were able to switch freely to remote work, wealthier households saw the value of their assets appreciate, and savings were disproportionately concentrated among high-income households. This cohort may well turn out to be the pillar that allows the Fed to stage a soft landing.

Until inflation is evidently down, the US Fed should retaliate aggressively with tighter monetary policy, especially with unemployment near historic lows. The hawkish tone of many central banks around the world is driving up interest rates and clouding the outlook for corporate earnings.

Valuation multiples of broad indices have moved closer to longer-term historical averages. However, negative revisions to future earnings could contribute to further downward pressure on stock prices.

Investors are encouraged to look beyond volatility and adhere to a strategy of holding a diversified portfolio of financially strong and profitable companies.

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TOP CHOICES:

Alphabet (GOOGL NASD)

Recent purchase price range of $2,300 in June 2022

Alphabet is a global technology company, providing the world’s leading search engine, Google, and dominates in global search engine queries on desktop and mobile. The company is taking advantage of the shift to online advertising, offering various AI-powered digital advertising tools. Other revenue streams include Google Cloud, YouTube, and Google Play.

Mondelez (MDLZ NASD)

Recent buy price range of $60 in June 2022

Mondelez is a global snacking company with Tier 1 market share in cookies, chocolate and candies. Its portfolio of leading global brands includes Oreo, beVita, Ritz, Cadbury and Toblerone. With nearly 40 percent of its revenue coming from emerging markets, Mondelez is well positioned to benefit from the growing middle class in these regions. Mondelez offers investors a dividend yield of 2.3%.

Royal Bank (RY TSX)

Recent buy price range of $127 in June 2022

The diverse mix of Royal Bank’s business includes personal and commercial lending (45% of earnings), capital markets (25%), wealth management and insurance (26%) and investor and treasury services (4%). Geographically, Canada represents 58% of revenues, the United States 25% and international 17%. The stock offers investors a current dividend yield of four percent.