Quarterly Market Commentary

as of June 30, 2023


What's happened since the last report?

The following commentary represents the opinions and analysis of Doug Nelson, President, Portfolio Manager, Nelson Portfolio Management Corp. as of January 5, 2021.  Market and index returns noted below are based on the price changes for each quoted item for the period ending December 31st, 2020.  Market Statistics:  Source: https://ycharts.com

  • Over the past 3 months (October 1st to December 31st, 2020) the Toronto Stock Exchange Composite Index (S&P / TSX Composite Price Index, TSX) increased in value by approximately +8.14%, where most of this gain took place between November 1st and December 8th, 2020. Over the past 12 months the price index gained +2.17%, but since February 20th, 2020 (the market highs) the TSX is down by approximately -2.85%.
  • Over the past 12 months the Financial Services Index (XFN, the Canadian Banks) has declined by

-2.76%, the Energy index (XEG) has declined by -37.12% and the Real Estate index (XRE) has declined by -17.55%.  The positive gains in the Canadian market have come from Technology (XIT) +54.07%, Utilities (XUT) +9.37% and the Materials sector (driven by Gold, XMA) at +18.88%.

  • In the U.S., the broad-based New York Stock Exchange Composite Index (I am choosing this index because it is a better representation of the overall market) gained +14.35% over the past 3 months and + 4.4% over the past 12 months. Since the February 20th, 2020 highs, the index is +3.29%.
  • Europe & Asia (Symbol XIN, currency hedged EAFE index) is +10.07% for the past 3 months and

-2.24% over the past 12 months.  The Emerging Markets index (XEM) gained by +11.94% over the past 3 months with a 12 month return of +12.59%.

  • By comparison the NFC Tactical Asset Allocation Pool had a gain of +5.96% (vs. the TSX at +8.14%) over the past 3 months. We strive to generate a return that is 70% or more of the TSX Composite Price Index:  70% of 8.14% = +5.7% vs. the Tactical Pool Return of +5.96%.   Over the past 12 months the Pool has generated a return of +4.47% net of fees.  By comparison, 70% of the TSX index is approximately +1.519% (70% X +2.17% = +1.519%), which means that the net Pool return for this past year exceeded the 70% level of the TSX Composite Price Index (+4.47% vs. 1.519%).
  • Your returns will be similar to the returns of the NFC Tactical Asset Allocation Pool, depending on your risk profile, fee structure and deposits / withdrawals over time.

Now let’s take a look at the returns of the TSX Composite Index over the past 5 years.  Chart 1 is for the period ending September 30th, 2020.  This chart was included in the September 30th, 2020 commentary. 

Chart 1:  The S&P TSX Composite Index (the Toronto Stock Exchange) for the 7 Years Ending September 30th, 2020.  The 1-year return is -3.22%,  3-year return is  +1.18% per year, and the 5-year return is +4.0% per year. Source: https://ycharts.com

Now let’s compare this to Chart 2 below, for the period ending December 31st, 2020.  This provides an interesting comparison of the difference that just three months can make to overall returns.

Chart 2:  The S&P TSX Composite Index (the Toronto Stock Exchange) for the 7 Years Ending December 31st, 2020.  The 1-year return is +2.17%, 3-year return is +2.45% per year, and the 5-year return is +6.0% per year.  Note:  September 3, 2013 is the inception date of the NFC Tactical Asset Allocation Pool.  The TSX Composite Price Index for this period is approximately +4.37% per year vs. the NFC Tactical Asset Allocation Pool, net of fees, is +5.91% per year. Source: https://ycharts.com

Below is my updated table of the quarter-by-quarter performance of countries, regions and sectors.

Table 1:  Asset Class, Region and Sector Returns Over Past 4 Quarters and Year-To-Datehttps://ycharts.com


  • Over the past 12 months, the areas of the largest gains have been Canadian bonds (+5.8%) and U.S. bonds (+6.79%), Gold (+24.81%, which has contributed to the gains in the Canadian Materials sector of +18.88%), U.S. Health Care (+21.2%) and Technology (U.S. +44.47%). Gold has gained due to declines in interest rates and the falling value of the U.S. dollar.  S Health Care has gained in value due to hopes around finding a vaccine for the Covid-19 Pandemic while Technology has gained due to the increased reliance on internet-based technology.
  • Offsetting those gains are the declines we have seen in the Financial Services and Banking sectors in Canada (-2.76%) and in the U.S. (-13.06%). Due to the uncertainty over the economy, higher loan loss provisions and much lower interest rates, this sector has seen significant declines.
  • Energy has declined (-37.12%) due to the slowing economy and the negative sentiment towards fossil fuels.
  • Real estate has declined (-17.55%) due to the slowing economy and the belief that there will be less demand for commercial and industrial real estate.
  • It is interesting to see just how the returns between these different sectors have been so significant.

In this environment, how has the NFC Tactical Asset Allocation Pool performed?

Over the past 12 months the Tactical Pool has generated a positive return of +4.47%, net of all fees and expenses, in an environment where the Toronto Stock Exchange has a 1-year return of +2.17%, the New York Stock Exchange Composite Index is 4.40%, and the Europe / Asia index (EAFE) is -2.24%.

The US Equity component of the NFC Tactical Asset Allocation Pool generated a return of +12.76% (before fees), while our equity component overall generated a positive return of +8.25% (before fees).  The defensive component of the Pool generated a one-year return of +6.4% (before fees), also favouring well against the 12 month returns for Canadian bonds, that we see in Table 1.

Despite the challenges of this past year, the NFC Tactical Asset Allocation Pool has performed well.

Today the Pool is more aggressive than it was at the end of September 30th, 2020:

June 30th, 2020 Sept. 30th, 2020 Dec. 31st, 2020
Cash 4.46% 8.31% 2.94%
Defense 39.45% 39.23% 32.56%
Growth 56.09% 52.46% 64.50%


What Have We Been Up to Over the Past Several Months?

Nelson Portfolio Management Corp. has with BCV Asset Management Inc.  Both firms are based in Winnipeg, and the principals of each firm know each other well.  Several years ago, BCV was selected to be the back-up Portfolio Manager to the clients of Nelson Portfolio Management Corp. in the event that I (Doug Nelson) was unable to fulfill my duties as Portfolio Manager.  Today we have expanded this relationship to one where Lynda Perrick and I are now part of the BCV Asset Management Investment Committee, a group of 12 registered Portfolio Managers and Associate Portfolio Managers.  BCV Asset Management currently manages over $2.5 Billion in assets.

What does this mean to you and the Nelson portfolio management process?  The BCV Asset Management approach is one that focuses on owning a core basket of 40 well researched securities.  When you know the companies you own very well, the day-to-day price fluctuation of the value of these companies become less important.  Instead, the focus evolves to tracking the evolution of that company as it reaches its various goals over time.  The goal of this approach is to own a great collection of 40 businesses over a longer period of time.  This additional research, perspective and insight will be of great value to the clients of Nelson Portfolio Management Corp.  Some or all of the 40 preferred BCV companies may within the NFC Tactical Asset Allocation Pool, while the best of this group will be held within individual client accounts, in much the same way we do today.

The historical gross returns of the BCV Canadian and U.S. equity model portfolios are shown :

Table 2: BCV Asset Management Inc. Model Portfolio Returns as at November 30th, 2020.

Source: BCV Asset Management Inc.

Lynda Perrick (once Lynda has her full Portfolio Manager Registration) and I will continue to be responsible for making all of the final decisions regarding the NFC Tactical Asset Allocation Pool and your individual account.  However, by tapping into the knowledge and expertise of the BCV Investment Committee, we will be able to discuss more thoroughly, with our peers, the pros and cons of different investment considerations.  This relationship is also important because it creates greater longer-term continuity for you and your family.  .  Should something unexpected ever happen to me, I have now created a more formal structure that provides to you greater continuity and consistency for the years ahead.  This is something that is very important to me.

This is a very significant partnership that we are extremely excited about.  Nelson Portfolio Management Corp. will continue to operate independently yet have access to all of the resources of a much larger firm.  This is the equivalent of instantly growing our NPMC Portfolio Management team from a group of 3 to a group of 12!  Very exciting, indeed.

With regards to specific investments, over the past 3 months, we have continued to add to the Financial Services sector (I.E., the Canadian banks) as we believe that as the economy begins to grow that we are likely to see some strong gains in this area.  We have also been adding to investments in the clean energy area as well as investments in self-driving and electric vehicles.

Over the past 7 years and four months (since inception), the Tactical Pool, after all fees and expenses, has generated a return of +5.91% per year vs. the Toronto Stock Exchange Composite Index of approximately 4.7% per year.  This is a return that is approximately 26% higher, but with a level of risk (Standard Deviation) that was 50% lower (6.44% for the pool vs. 12.74% for the TSX).  Our goal back in 2013 was to create a balanced investment that generated a return of 5.0% to 7.0% per year with as little risk as possible.  It is great to see that over this 7+ year period of time that we have achieved this goal.

Chart 3:  Risk and Return Analysis Report:  NFC Tactical Asset Allocation Pool:  September 3rd, 2013 to December 31st, 2020:    The blue triangle is the risk and return metrics of the NFC Tactical Asset Allocation Pool.  The green dot represents the defensive side of a portfolio (Canadian bonds), the yellow dot is the S&P TSX Composite Index (Canadian stocks) while the orange dot represents Global stocks (MSCI World Equity index). Source:  www.croesus.com

Our goal is to always learn, and improve what we do, each and every day.  Our new partnership with BCV Asset Management will give us access to a team of successful and capable Portfolio Managers that will provide greater access to market research and security selection.  Our goal is to continue to increase returns while managing risk.

Where Do We Go from Here?

Looking back at Table 1 you can clearly see the difference between those sectors that have done very well vs. those that have had horrible returns.  Our plan today is to continue to stay with our three-pronged approach:

  • Defensive Income Securities: Over the past 18 months we have allocated close to 20% of the total Pool holdings to the Private Lending Pool category.  This will help to continue to provide considerable income (5.0% to 6.0% annually) while also providing stability to the portfolio.  Other defensive holdings include our Corporate Bond ladder, some convertible bonds and the preferred shares.  We don’t expect to increase the weight of the Private Lending Pool category any further at this time.
  • Core Equity & Income Strategy: The Banks, REIT’s (Real Estate Investment Trusts) and the Renewable Energy sectors are providing some interesting investment opportunities today:  Less expensive valuations that also pay a higher-than-average dividend.  We are continuing to review and monitor these core holdings and continue to look out for new opportunities.
  • Growth Strategy: We do feel that for the next 3 to 6 months we may continue to see the continued emphasis on technology innovation and technology reliance.  Therefore, we do wish to remain exposed to these growth sectors, but we also wish to be pragmatic and take profit on these investments when valuations appear to be a tad rich.

This past September (2020) I wrote: “As the global pandemic continues to evolve over the winter months, we do expect to see a softening economy.  However, as we enter the new year, markets may begin to feel a renewed sense of optimism, with the hope that we are getting closer to the end of this challenging period.  To anticipate some of this momentum we continue to look at securities that are significantly under-valued, which may then lead the economy going forward at that time (renewable energy, banking, real estate and the industrials sectors).  At the same time, however, we also continue to have a high-level of exposure to the emerging technology growth sectors of today.  We don’t expect this leadership to change, but we do feel it is prudent to keep a close eye on the value of these securities.  Many of these companies have extremely high valuations today, which would suggest that there is always a chance of seeing a decline.  Our preference is to always take profit in these names along the way.”  We continue to follow this same approach today.

Thank you for your continued trust and confidence.  Should you have any questions or concerns at any time, or if you would like to see a more individual analysis of your personal portfolio, please don’t hesitate to let me know.

All the best!



  • Book Value vs. Market Value On Your National Bank statements: The book value information on your National Bank statement is not your net invested value.   Rather, the book value is the total of your invested value minus withdrawals and plus any dividend income received.  Thus, part of your investment return over time will show up as part of your book value.  Therefore, please do not compare the book value and market value on your National Bank statements and believe that the difference is your investment return.
  • Discrepancies between the Nelson portfolio reports and the NBIN (National Bank Independent Network) monthly statements: We see that in some cases there are some small discrepancies between the total portfolio value seen on the Nelson statements and the NBIN monthly statements. In most situations these discrepancies are caused by the timing of when the NBIN statements are produced and when the data concerning the quarterly distribution for the NFC Tactical Asset Allocation Pool is provided to NBCN. This is a timing issue and not an error. Should you have any questions or concerns, or if you identify other discrepancies, please let us know immediately.
  • Paper vs. Secure E-Mail Link: It is NPMC’s preference to provide to you this quarterly portfolio package by e-mail. However, if you would like to receive this package in paper format, please let us know and we will accommodate your preference accordingly.







"IMPORTANT DISCLOSURES: The comments above are for information purposes only and do not constitute specific financial advice regarding your specific situation. Please consult a professional financial advisor who is familiar with your personal situation before acting on any information presented above. Every effort has been made to ensure this information is presented responsibly and accurately. However, important details may have been missed or these details may have changed since the publication of this note. All facts and opinions noted above must be reviewed to ensure their accuracy is still relevant based on today’s specific situation, whatever that may be. Nelson Financial Planning Corp is not responsible for any action you take regarding this information."