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 October 4th, 2021.  Market and index returns noted below are based on the price changes for each quoted item for the period ending September 30th, 2021.  Market Statistics:  Source: https://ycharts.com.

  • Over the past 3 months (July 1st, 2021, to September 30th, 2021) the Toronto Stock Exchange Composite Index (S&P / TSX Composite Index, TSX) declined in value by approximately

-0.47%, driven primarily with declines in the Materials sector (-6.15%) and little to no gains in the financial sector (+0.26%).

  • In the U.S., the broad-based New York Stock Exchange Composite Index (NYA) declined by -2.48% over the past 3 months while Europe & Asia Index (Symbol XIN, currency hedged EAFE index) declined by -1.1% and the Emerging Markets index (XEM) declined by -8.84%.
  • The broad bond index in Canada (XBB) declined by -1.32% and U.S. investment grade bonds index (XIG) declined by -1.14%.
  • 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 -0.81% ((60% X -0.47%) + (40% X -1.32%) = -0.81%). By comparison, the NFC Tactical Asset Allocation Pool gained in value, net of fees, by +2.50%.

For July and August, most industry sectors were performing well, except for the Energy sector.  The Canadian Real Estate sector (XRE) had a positive return in July and August of +5.89% yet declined by                               -4.03% in September as there was increased concern over rising interest rates and inflation.  The Toronto Stock Exchange Composite Index increased by +2.60% for July and August, but then declined by -3.0% in September.  In July and August, the Energy sector had declined by -12.49%, yet gained by +17.93% in September to post a positive gain for the quarter.  In the U.S. we saw the broad-based New York Stock Exchange Composite Index increase by +1.76% and the Nasdaq Composite Index increase by +5.55%.  Yet in September the New York Stock Exchange Composite Index declined by -4.16% and the Nasdaq Composite Index decline by -5.62%.

This type of ebb and flow occurred in February of this year.  In the first three months of the year, interest rates increased, which in turn boosted returns of the Financials sector while reducing returns in the Technology sector.  Over the past five 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 sectors.  In September, this trend has reversed again as interest rates have risen.  Interest rates have started to rise as the Federal Reserve (the U.S. Central Bank) begins to talk about the timing of exiting their bond buying program (which began in April 2020 during the early phase of COVID).  When the Federal Reserve reduces its bond buying program, then demand for bond purchases goes down.  When demand goes down, the price of those bonds will also go down, which means that the interest rate on those bonds will rise.  As interest rates rise, the “value” of an individual stock is then repriced where the “more expensive” stock prices will likely see a decline.  This is why we have seen larger declines in the Technology sector whenever interest rates rise.  This is normal and is something to be expected.

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 Last 12 Months.

Source: https://ycharts.com.


  • In the table above you can see that most of the gains in the Canadian market over the past year have occurred between October 1st, 2020, and June 30th, 2021.
  • You can see how the higher quality bond categories above (XBB, XIG) have had some negative returns during times when interest rates have been rising (January to March 2021; July to September 2021). You can also see how the Technology Index saw much higher returns in the April to June 2021 time period while interest rates remained flat or declining. 

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

Over the last three months the NFC Tactical Asset Allocation Pool (the ‘Pool’) has gained in value by +2.50%.  So far this year, the 2021 Year to Date return is +12.59% and over the past 12 months the Pool has generated a positive return of +19.31%, net of all fees and expenses.

By comparison, over the past 12 months the price return on the broad bond index (XBB) was -5.94% and the Toronto Stock Exchange (XIC) price return was +24.49%.  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 +12.32%, which is well below what we see with the Pool’s return as mentioned above.  Over the past 12 months the Defensive Component of the Pool generated returns of +8.30% while the Growth Component generated returns of +28.00%.

Over the summer the Growth Component increased to be as much as 68% of the Pool’s value.  Over the past several weeks we have been reducing the growth component while increasing the Defensive Component.  Today the Pool has an asset mix of 5.30% cash, 33.30% defense and 61.40% growth.

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

Over the past several months we trimmed some of our highest performing and overweight securities back to a neutral weight, from an overweight position, as markets started to weaken into September.  This strategy resulted in trimming approximately 15 holdings, resulting in additional cash that could then be added to more defensive holdings and / or other securities that we would like to buy at lower levels.  Our largest gains included a 295% gain on our Nvidia Corporation shares (semi-conductors), a 206% gain on TFI International Inc. (transportation) and a 111% gain in a company called Topicus.com Inc. (technology).  We still own all three of these companies, but we wanted to rebalance these holdings back to a more normal allocation in the Pool.

Over this past year, with lower interest rates available to corporations, corporate debt has also been restructured.  We have seen this with Air Canada redeeming a bond that we own (Air Canada bond that matures in 2023, 4.75% interest rate) to a longer-term Air Canada bond that we purchased (4.625% interest rate, matures in 2029) and the redemption of the Sun Life Financial Inc. Preferred Shares Series A and Series B.  We have held these investments since 2008.  Sun Life is able to redeem these shares and issue new debt at a lower cost to the corporation.  With these proceeds we invested into two new income-oriented products launched by PenderFund Capital Management.  Most clients will own the Pender Corporate Bond Fund in their portfolio.  We own the Pender Corporate Bond Fund and the Pender Small Cap Opportunities Fund in the Pool.  So, in addition to these funds we invested into two new income-oriented funds called the Pender Alternative Absolute Return Fund and the Pender Alternative Arbitrage Fund (https://www.penderfund.com/liquid-alternative-funds/).  Both funds are designed with their objectives to be defensive and protect capital while generating an annual yield of 4.0% to 7.0%.

Finally, some of the new holdings in the Pool include Sherwin-Williams Company (Consumer / Industrial Sector), Stanley Black & Decker Inc. (Consumer / Industrial Sector), Deere & Company (Agriculture), Tourmaline Oil Corp. (Natural Gas), and Novo Nordisk A/S (Pharmaceutical).  We have also topped up other underweight holdings when their prices corrected. 

Where Do We Go from Here?

Today the Pool remains in a Balanced – Growth profile, with 62.0% exposed to equities and 38.0% exposed to defensive strategies.  Since September 1, 2021, through to October 4th, 2021 (the time of writing this commentary), the Toronto Stock Exchange Composite Index has declined by approximately   -3.50%, the New York Stock Exchange Composite Index has declined by almost -5.0% while the Nasdaq Composite Index has declined by approximately -8.10%.  During this same period of time (September 1st, 2021, through to October 4th, 2021), the Pool has declined by approximately -2.50%.

As markets correct, buying opportunities become available, especially when many individual companies have declined by 10.0% to 30.0% during this time.  FedEx Corporation is now 31.0% off of its high price (so we bought more), Stanley Black & Decker Inc. is 21.0% below its previous high (so we added this as a new position), and Canadian Pacific Railway Limited is 16.0% off its recent high (so we bought more).

From this point forward we anticipate some potential additional market declines of -5.0% to -8.0%.  However, with lower interest rates, we do believe that these declines will be short lived and that markets will begin to move higher shortly thereafter, which is why we wish to keep the Pool still tilted towards growth.  We will continue to trim those securities that we feel have higher downside risk while adding to those other securities that we feel have been over-sold.

Should you have any questions or concerns about this commentary, our approach, or your specific portfolio, please reach out to me.  I would love to review your portfolio in detail with you any time you wish.

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."