Quarterly Market Commentary

as of December 31, 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 July 6th, 2021.  Market and index returns noted below are based on the price changes for each quoted item for the period ending June 30th, 2021.  Market Statistics:  Source: https://ycharts.com.

  • Over the past 3 months (April 1, 2021 to June 30th, 2021) the Toronto Stock Exchange Composite Index (S&P / TSX Composite Price Index, TSX) increased in value by approximately +7.83%, driven primarily with gains in Real Estate and Energy.
  • In the U.S., the broad-based New York Stock Exchange Composite Index (NYA) gained +6.11% over the past 3 months while Europe & Asia (Symbol XIN, currency hedged EAFE index) is +3.55% and the Emerging markets index (XEM) gained by +1.82%.
  • The broad bond index in Canada (XBB) increased by 1.04% and U.S. investment grade bonds (XIG) increased by +3.47%.
  • To put this into perspective, if a balanced portfolio held 60% in stocks and 40% in bonds, then the return over the past 3 months would have been approximately +5.11% ((60% X +7.83%) + (40% X 1.04%) = +5.11%). By comparison, the NFC Tactical Pool gained in value, net of fees, by +5.66%.

Over the past three months we have seen continued gains in all sectors and asset classes.  The gains, in my view, have been quite consistent, moderate, and orderly.  In the first three months of the year, interest rates increased, which in turn boosted returns of the financials while reducing returns in the technology sector.  Over the past three months we have seen the opposite.  Interest rates have stabilized and declined, resulting in a smaller increase in the financial sector, an increase in the price of bonds and increases in real estate and technology.  I would consider this to be the normal ebb and flow of a market environment.

In the March 2021 commentary I mentioned three primary concerns:  i) the amount of leverage in the market and how this additional leverage continues to drive stock prices in some areas higher, ii) rising interest rates and how this may be a catalyst to drive stock prices in other areas lower and then iii) how to build a diversified portfolio to take advantage of these gains when they occur, but not be too concentrated to be significantly hurt by any declines that take place quickly over short periods of time.  These are the things we think about when we build our portfolios.

Over the past three months it seems that some of the valuation risks are moderating.  Crypto currencies, such as Bitcoin, have seen declines of 50.0% over these past three months and other high-flying stocks, such as Tesla, have seen declines of -22.0%.  Interest rates have declined slightly, so the concern about rising rates and inflation has also moderated.  These moderations enable us to focus on our core investing themes (renewable energy, electricity demand, technology infrastructure, financials, industrial real estate, and medical devices).

With these thoughts in mind, let’s take a look at the returns of the TSX Composite Index over the past 7+ years.

Chart 1:  The S&P TSX Composite Price Index (the Toronto Stock Exchange) for the 7+ Years Ending June 30th, 2021.  Source: https://ycharts.com.  The 1-year return is +29.97%, 3-year return is +7.39% per year, 5-year return is +7.47% per year, and the 7-year return is +4.95% per year.

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-Date.

Source: https://ycharts.com.


  • In the table above you can see that most of the gains in the Canadian market over the past year has happened in the last 9 months, since October 1, 2020. (October 1, 2020 to June 30th, 2021 = +27% vs. +29.97% for the past 12 months – July 1, 2020 to June 30th, 2021).
  • We can also see how the size of the gains in each sector appear to be moderating to more normalized levels. In the 4th quarter of 2020, the Financial Services sector in Canada increased by 15.33%, but these gains have moderated such that the gain over the past three months has been only 7.28% (in my opinion; still a great return but it is trending lower to more moderate levels).  The same is true for the Energy sector, the broad US market, the US Banking sector and in other regions around the world.
  • Thus, the exuberance that we saw between November 2020 and March 2021, feels like it is beginning to moderate, which is good.

In this environment, how has the NFC Tactical Asset Allocation Pool performed? (Source:  Croesus software)

Over the last three months the NFC Tactical Pool has gained in value by +3.87%.  So far this year, the 2021 year to date return is +9.8% and over the past 12 months the NFC Tactical Pool has generated a positive return of +22.32%, net of all fees and expenses.

By comparison, over the past 12 months the price return on the broad bond index (XBB) was -4.92% and the Toronto Stock Exchange (XIC) price return was +29.97%.  If 60% of a comparative portfolio was invested in the Toronto Stock Exchange and 40% was invested in Bonds, then the 1-year return is approximately +16.01%, which is well below what we see with the Tactical Pool return as mentioned above.  Over the past 12 months the Defensive Component of the Tactical Pool generated returns of +10.3% while the Growth Component generated returns of +35.0%.

Today the pool is still tilted towards Growth:  Currently 2.54% cash, 30.50% defense and 66.96% growth.

Here is an update of the relative performance of the Tactical Pool.  The goal of the pool, as the core of your portfolio, is to capture 70% or more of the upside growth of the TSX Composite Price Index while protecting against 70% or more of the downside when markets decline.  The table below illustrates the 70% portion and the amount of out-performance over each period of time.  It is important to remember that the Tactical Pool is a Balanced investment whereas the Toronto Stock Exchange Index is 100% allocated to individual stocks (Equities).  Since inception* the Tactical Pool has outperformed this measurement by approximately 3.33% per year over the past 7.75 years, net of all fees and expenses.

Also, for most client accounts, we also invest into a basket of what we call the Core 6 Exchange Traded Funds (Symbols:  HAL, ZLB, HAC, HAZ, XMW, ZGQ).  Similar to the TSX Composite Index, the Core 6 is also 100% exposed to Equities.  The 5-year return for this basket of securities is +10.24% per year.

Table 2:  Historical Returns of the NFC Tactical Asset Allocation Pool and the Core 6 ETF’s vs. the TSX Composite Price Index for the Period Ending June 30th, 2021.  Source:  Croesus, Ycharts.

*Inception Date Reference for the NFC Tactical Asset Allocation Pool in the above chart: Inception Date: September 3, 2013

I am very pleased with our performance. 

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

Nelson Portfolio Management Corp. has created a new strategic relationship 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 $3.5 Billion in assets.

As the year has evolved, we have continued to focus on the following investment themes:

  • Expanding Economic Growth: As the economy continues to move into a post Covid-19 world, we anticipate that technology will continue to be a major beneficiary of this growth.  Companies will continue to look for ways to enhance their competitiveness and provide better services to their customers.  Thus, there will be increased demand on key software providers, such as Microsoft, Salesforce.com and Service Now to provide great tools to their clients, so these clients can grow and evolve.  There will be increased demand for hardware, such as the semi-conductor manufacturers, to create more power so as to process more data.  Thus, the data analytics firms, such as Snowflake and Data Dog, will also likely continue to grow.  As the dependence on technology grows, so too will there be increased demand for cyber security and server farms.  We invest directly into Crowd Strike and a Cyber Security ETF (HACK) to benefit from this.  We also invest into a real estate investment trust that builds server farms (Digital Realty Trust).  The technology theme represents approximately 14.0% of the current value of the NFC Tactical Pool.  As the economy grows, there is also the increased demand for the shipment and delivery of goods.  Thus, the transportation and warehousing exposure is approximately 8.0% of the pool value.
  • Increased Demand for Electricity: With all of the demand on current and future computing power, as well as the demand for battery powered transportation and clean energy, we believe there will be a growing demand on the electrical grid and on the raw materials that will make this happen.  Thus, we have 10.0% exposure to various forms of electrical energy and battery power.
  • Rising Interest Rates and Inflation: While at this time we are not concerned about rising interest rates or inflation, should this begin to arise we wish to be ready.  The banks will typically do well in this type of environment as will other hard assets such as real estate and commodities.  The total exposure to this theme is approximately 15.0%.
  • Broad Market Exposure: To round out the growth component of the Tactical Asset Allocation Pool, we also have an 8.0% exposure to the broad market indexes and another 10.0% exposure linked to health care and consumer staples.

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 versus those that have not.  Our plan today is to continue to focus on the investment themes mentioned above.  Of the securities that we hold in each category, we like those firms that generate a regular dividend, have increasing revenue and profit and have capable management teams.

We do feel that the markets overall have a very normal downside risk today of -7.0% to -15.0%.  This would be a very normal correction.  If we experience this level of correction in the market, then we would expect your portfolio to decline by -2.0% to -7.0%.  With this in mind, we are not overly concerned with the health of the overall markets today.  Most markets, and most stocks, continue to move higher and we believe that this trend will remain as is for the coming months.

It is with these thoughts in mind that we review and monitor our portfolios each day.

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 NBIN. 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."