Paul Bagnell and Rob Tétrault
Paul: We are back with our guest host Rob Tétrault, Vice-President and Portfolio Manager at National Bank Financial. You say that volatility goes away by the end of the first week after a natural disaster. What have you seen in the past as we continue to track Hurricane Harvey? It’s obviously the human tolls taking, but also the market’s impact.
Rob: Yeah, and I’m not trying to understate the human toll, it’s obviously significant, but again when I sat this weekend thinking about this and looking at this disaster I said, “How is the market going to react this week? So, I did a little bit of digging and there was a great article that was a research paper that was put up by Ed Sollbach, I want to give him some props. I understand he’s writing. But basically, looking at the past, call it eight to ten natural disasters, there’s been a bit of a trend. Initially we see a drop off as you would expect, and that’s a risk-off and appreciation in gold, but over time, and specifically by the end of the first week, and I actually sent this piece to my clients yesterday. I thought it was so relevant. We see a small gain of anywhere of about ½%. More importantly in the month after because I think that becomes a little bit more relevant. We see a gain of about .7%. So, that’s looking at eight of the natural disasters in North America and that includes earthquakes, I should say in Latin America and North America, earthquakes, floods and hurricanes specifically.
Paul: What would your advice be to investors who might take up positions in say, energy stocks and they have come off on this news or energy stocks that may have even risen on this news?
Rob: Well, first of all I would suggest you know, I know a whole lot of the viewers at home here do this themselves, and they’re experts in this and they’re mine for sure, but generally I would suggest you make sure you leave this to your advisor, your portfolio manager because I think it’s not that easy to play this world because there’s a lot of emotion happening right now. The sell-off is likely based on emotion but if you are trading on your own the energy sector actually has a multiple in terms of sectors right now in Canada. It is trading at the lowest multiple of all the sectors in Canada. So, if you believe in the long-term, by the way, I think the energy play has stabilized itself. I think we now know that we’re in a world right now in Canada where oil is going to be whatever, 45/50 bucks for a while. So, if that’s what it is and we’re able to be profitable there, I don’t mind the energy play actually. As a potential, be ready for the volatility but there’s a lot of upside there.
Paul: If an investor should not focus on things like natural disasters or geopolitical tensions, what should they be focused on?
Rob: The key for investors is, most investors should be retirement, financial planning. That’s the majority of our clients. That’s what they care about. And then we have the tax planning and the corporate planning for our business owner clients. We have a state planning which I think is very, very important for everyone because tax rules change as we see with the Trudeau Government. Tax rules are ever changing so, that will where you left everything to a trust where the trust is now going to…maybe that’s not going to be taxed the same way now. So, those are kind of the big picture things that I think clients should keep their minds on and the smaller minutiae of the day to day, “Do I buy energy on the Monday after a natural disaster?” Don’t bother with that? It’s going to keep you up at night. Let us do that. Let the Pros do that.
Paul: What’s the market trading on right now if you leave aside things like North Korea and the disaster in Texas, earnings or earnings supporting the market now?
Rob: I think everyone who’s been on the show has said it and I’m kind of echoing that statement. Earnings have been really good. I think the job numbers in the US, they’ve been unbelievable. Canada, we’re seeing consumer spendings. So, I think that the Canadian GDP numbers that are going to come out tomorrow, I think they are going to be very impressive and I think we’re on pace for a 3% year if you can imagine that. When we sat here last year if we would have thought we’d have a 3% GDP year in 2017 you would have said that that’s impossible. And now we’re staring in the face, even with a trade deficit and even with reduction, or not with the infrastructure spending that we thought we’d get from the government, we’re seeing a potential 3% GDP year in 2017 for Canada.
Paul: Rob Tétrault, he’s my guest-host today and he’ll be with us for the remaining hour of the program.