In This Issue:
What is Rate of Return?

How will the Trump U.S. Presidential election victory affect my portfolio, business or the economy in the coming years? That is a question investors are currently contemplating post Donald Trump’s election to the most powerful position in the world. The short answer is no one really knows. For investors, the immediate aftermath has been pretty good, with U.S. stock markets hitting all-time highs and U.S. Bond yields finally starting to rise. This very short term lift comes from a general view that the Trump Administration will lean towards lowering corporate taxes, decreasing regulation and increasing infrastructure spending. These are seen as positives for the Financial Services Sector (if he scraps the Frank Dodd Act), the Healthcare Sector (Trump is seen more friendly towards pharma companies than Hillary Clinton), and the Industrial Products Sector (if he holds to his aggressive promise to spend on infrastructure projects throughout the U.S.). If he holds to his aggressive spending and job creation promises, there is a sense that the U.S. economy actually may see inflation get up over 2%. However all of this is on the presumption that President Trump holds to and executes his election promises.

President-elect Trump aside, the US economy is in relatively good shape as we move into 2017. To the end of October, it created just over 180,000 new jobs per month. In 2015 it created 215,000 new jobs per month and 220,000 per month in 2014. In all, the U.S. economy has created over 7 million new jobs since the beginning of 2014, causing the unemployment rate to drop to 4.9% at the end of October 2016. Granted, U.S. stocks are fully valued with the S&P 500 trading at 20 times 2016 earnings forecasts, but they are more reasonably valued at 16.5 times 2017 earnings forecasts. With over US$2 trillion in cash on their balance sheets, Corporate America is in good shape to fund expansion and growth. With bond yields remaining at historical lows, stocks continue to look reasonably valued on a relative basis. In Canada, the TSX 60 is currently yielding 2.7% while Canadian Government 10 year bonds are yielding 1.5%. Europe is finally showing some positive signs that their collective economies are improving.

Although stocks in your portfolio continue to display the best relative value, after eight years into this current Bull Market, it is not the time to be increasing the equity weighting within your portfolio (unless, of course, something has changed in your personal circumstances). If stock prices rise through the balance of this elongated bull market, your Asset Allocation Plan will call for a rebalancing from equities to fixed income. As this economic cycle matures, we hopefully will see bond yields rise to more normalized levels, and the portfolio rebalancing call will give us the opportunity to take advantage of these higher yields.


In September, we  thought of a new pair of diagnostics to manage your portfolio better.smallthings

Hunter created Excel algorithms in a beta-test file and we subsequently have been rolling them out into every client portfolio file. These diagnostics provide a quick quantitative feedback to us when we are reviewing your portfolio: one at the big picture level and one at the detail level. The first one gives us a simple statistic of how far away percentage-wise the portfolio is at any given date from the Asset Allocation Plan you charge us to maintain. The second one does something similar: it monitors deviation from the Plan across all of your industry sectors. In a computer click, we also can review these two statistics across different time periods to see what trend may be developing. The information produced gives us signals for calls to action.    


This Fall, we executed an idea we have held for many years. We constituted a volunteer ad hoc Board (“CAB”) of client representatives and shared an afternoon with them at Harrison Hot Springsboard Resort. We asked them to wear multiple hats over the course of the afternoon, changing in roles from “client” to “Trivest staff member” to “Trivest shareholder”…each representing a different “stakeholder” perspective in the operation and success of our business. Trivest staff members gave presentations on various aspects of our operations. We shared the details of our most recent Annual Strategic Plan from last June and received input on a variety of topics…..

Our newsletter was well received …”carry on” was the advice. Raising our technology profile with the likes of podcasts, blogposts and a YouTube channel were not considered particularly valuable. The “most important thing” was the huge value-added of our integrated services, across investment management and tax, financial and estate planning. Investment-wise, the most important thing was long term adherence to the Investment Plan. Our Annual Report was very well received, in particular the graphs which provide long term perspective. We use exchange-traded funds (ETFs) heavily in most portfolios, in order to effectively lower your costs of investing and build strong, coherent portfolios; however, ETFs are not well understood, and we need to fill that knowledge gap with our clients. Fixed income also is a key component of most portfolios, and we similarly need to educate more about these instruments, as they become more complex than “just buying GICs”! Long term staff succession was queried. It was conveyed that the most important thing here is inculcating and maintaining the firm’s values into the next era. Lastly, we discussed client succession, as our client demographic ages. As wealth passes on to succeeding generations, will those portfolios transfer to other investment managers extant in those families?   

The conversations were notated during the day and a set of minutes was struck to provide us with guidance for the future.

We thank the Buckhams, Vickerys, Petkaus and Taylors for sending Family representatives to the inaugural CAB. These valuable inputs will direct our future efforts in our quest to serve you well.