September 2015

A Month to Forget;

As the last day of August comes to a close, it will be a month to forget. Slower growth in China led to concerns that the Chinese economy is going to have a time tough adjusting to a consumer-oriented model. Expectation for more moderate growth in the world’s second largest economy led to an undiscriminating sell-off in emerging markets which trickled into the developed world. Industries exposed to global growth were justifiably hit the hardest: oil and gas, mining, forestry, etcetera; while those with less reliance on global economic growth weathered the storm quite well: telecommunications, utilities, consumer staples, etcetera (FactSet, 2015).

After a two-day precipitous drop in assets around the globe, security prices began to recover and those with limited exposure to global growth recaptured a majority of their losses. Those companies that rely on economic strength from around the world remain below their previous highs as a reduced outlook for growth prospects remains justified.

There are conflicting points to this stock market story. On the one hand, growth in China is slowing down and the United States is looking to raise interest rates for the first time since the Great Recession. On the other hand, central bank monetary policy around the globe remains highly accommodative with interest rates at very low levels and stimulus ubiquitous. The Chinese government appears willing to take almost any measure to prop up growth and ailing stock markets. We’ve talked previously about betting against monetary stimulus – historically speaking, not a good idea.

We have acknowledged the risks and increased our cash weighting throughout the month. Our emerging market position has been reduced and our domestic positions with direct exposure to global growth have been scaled back. We remain optimistic the Chinese Government’s efforts will shore up growth and keep the stock market on track, but acknowledge valuations in the region had moved ahead of fundamentals. Since increasing our cash weight we have begun to deploy funds into unjustifiably beaten up areas of the market. We continue to have a higher-than-normal cash weighting in our portfolios and are looking for companies at attractive valuations.


FactSet. (August 31, 2015). Global Indices Data. Retrieved from FactSet Research Systems.

This newsletter was prepared solely by Bruce Morrison who is a registered representative of HollisWealth™ (a division of Scotia Capital Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada). The view and opinions, including any recommendations, expressed in newsletter are those of Bruce Morrison only and not those of HollisWealth. TM Trademark of The Bank of Nova Scotia, used under license. Morrison & Partners Wealth Strategies is a personal trade name of Bruce Morrison.