Andrew (00:02) Hi, I'm happy to give an update on the markets right now. Since our last update, it's been frenetic, to say the least. Certainly a lot of the themes that we have been discussing in these updates.

are clearly starting to come fruition within the markets. And so let's talk a little bit about what's going on and more importantly, how we're positioning our portfolios at Delisle. So one of the themes that we have discussed in the past relates to the level of volatility in the market, not reflecting the amount of uncertainty that exists right now. And so we clearly are through a period of

historic rate hikes that people are feeling the effects of and it takes time. Typically after rate increases by the Fed it's normally about a 12 to 18 month.

period for those effects to really be felt in the economy and lo and behold 12 to 18 months later from the series of increases we're starting to see real signs of strain with the consumer with the level of employment and that has caused certainly some jitters we've also talked in the past about the fact that the geopolitical tensions in the Middle East in Russia and Ukraine

have really not been reflected in the market and one of the measures of that is what's called the VIX, the volatility measure, which is used to price the options typically. It's been very, very low and it just really spiked very strongly over the last couple of weeks. It went as high as 66 and just to put that in perspective, the VIX,

during COVID reached 80, the VIX during the financial crisis also reached 80. And so it really spiked quick. It's now settled. It's still significantly higher than it's been, but it's settling at a VIX at around...

38 when it was traveling around 17. So there's certainly now more and more uncertainty within the markets. And we've seen that in the certainly in the volatility of the markets of late. The Canadian banks, we've been underweight financials. We've talked in the past about the lag effect. And if there is a slowdown or a recession in the Canadian market, the Canadian banks are particularly levered

to that exposure, just given the amount of lending that the five banks do. Last quarter it was at 3 .9 trillion in outstanding loans. And so if there is a slowdown, there will be a corollary effect to the banks. And we've been relatively underweight the banks. Now, not withstanding all this volatility, as I look at my terminal, the overall performance is still strong here to date. The S &P 500 is still up 11%.

As the act 11 % and the TSX is still positive 6%. What is interesting though is when you take a deeper dive at some of the stocks that have just been on a.

really meteoric tear in particularly the Magnificent Seven that we all talk about so much. And I'm just going to pull up a chart just to talk a little bit about what's been going on with the Magnificent Seven over the past month and over the year to date numbers. And as you can see with this chart, what you're looking at is the

Performance has still been very, very strong year to date. As you look at the average of the Magnificent 7 at 21 .6 % return year to date, but look at the past month. The average of the 7 is down 16. And in particular on the far left, take a look at Nvidia. Now, Nvidia is still 102 .8 % year to date performance, but the past month has been rough and clearly there's a significant pullback.

20 % drop over the past month. What do we kind of pull from that or discern as an investing theme? And one of the pieces I'm often stressing is at the end of the day, how you value a company really does matter. And this is a company right now that is priced at a 60 times earnings.

And so it's basically a 60 times P multiple. It's priced for precision. And we've seen this before, as we think about AI and the incredible potential of artificial intelligence, it's real. I'm sure like me, you're using it almost every single day and it's transformational, both for research, for doing things on a day -to -day basis. What normally happens at the onset of these types of new technologies

is there's a fervor and anybody who uses the word AI sees an immediate appreciation in the value of their company. And then it settles because the reality is while there will be significant gains from AI, it's still largely unproven as to how to quantify what those gains actually will be. And I think now we're starting to see a bit of a cooling and we've seen this before. NVIDIA.

is a company that has been incredible as a participant for this AI boom. However, Nvidia has also seen its share of significant drops in the past too. And I talked a little bit about the dot com boom, another kind of reminiscent and similar sort of thematic that.

We got very excited about the potential of e -commerce and dot com. Was it real? Absolutely, it was real. I'm not sure about you,

things stream into our house daily through Amazon. It's convenient, it's incredible. It's just a great way to to shop. It was transformational and it was real. However, the fervor around dot com companies was not real. Not every company gets to boom that way. And in fact, during the dot com

bust when things settled down, Nvidia actually dropped 70 % in that 12 month period. During the financial crisis, Nvidia dropped 80 % during that period. this is a volatile name priced for precision. And it's just a good reminder again, of not buying into momentum and really doing the work. And if you're not going to do the work to look at companies using an advisor to do the research and kind of

make sense of what's going on at any given time. Before we shift and talk about what we're doing within our portfolios,

Just wanna talk a little bit about what's going on with market reaction. Very clearly there is now universal consensus of significant rate cuts by the Fed and perhaps the Fed started cutting too late by not making a move in their most recent meeting. There's now virtually complete alignment of three rate cuts by the end of 2024 and in fact now there's a virtual

certainty priced in of a fourth rate cut in January. so we can expect that we will see rates drop certainly throughout the rest of this year into next year as well. Before we talk about Delisle and our positioning in the portfolios, which we're quite happy with right now, one more comment about gold. We've talked about gold in the past and we still maintain that gold

gold is a very effective hedge, particularly against market recessions. Gold has continued to reach new highs. We do have an overweight position in gold. And this really started with a bit of a misalignment globally. We've talked throughout the year that countries in the East have been massive accumulators of physical gold.

That has been a little bit slower in North America. But again, this thematic has been consistent. Gold is on a tear. It continues to do very, very well. So what does that all mean for us at Delisle? We, first of all, are very pleased with the overall positioning. As you know, we have been underweight equities with basically a view of what I've just shared of a lot of the global uncertainty

that exists right now, as well as the valuation that we are seeing in the market. We're underweight financials in Canada. We're overweight utilities. We're overweight gold. Our international exposure continues to be focused on India and Japan. While Japan did have a significant pullback the last couple of weeks, still very positive. And as a thematic, we still are very favorable to equities in India.

and Japan, we utilize ETFs to get our exposure in those countries. So overall, we continue with this strategy. It certainly has served us well through 2024. And we do continue to, of course, keep close eyes on a very interesting market environment. I hope this update's been helpful.