Climbing a Wall of Worry - Holdun


While the third quarter had its share of fits and starts, global stocks still managed to eke out a small gain. There were many worries to overcome which I have labeled BRIT, for Brexit, recession, impeachment and trade each of which were bandied about during the quarter. The global economy remained focused on the U.S./China trade dispute and continued to grapple with below average growth and waning investor confidence. The wall of worry has only gotten higher. In addition to BRIT, it could be last year’s fourth quarter sell off that’s prompting investor anxiety about a possible rehash this time around or maybe it’s the lingering US-China trade war that has investors worried or political turmoil across the world.

Global Asset Classes September 2019 & YTD

Source: Holdun Trestle Management Inc., John MacDougall


The S&P 500 returned 1.2% in the Q3, including dividends, bringing the YTD return to just under 20%. That’s despite a slowing economy, trade friction, economic weakness abroad, and an inverted US Treasury yield curve. In fact, it’s been the strongest first 9 months of the year since 1997.

But those 2019 gains come on the tail of a 14% drop in last year’s fourth quarter. Over the past 12 months, the index is up a mere 1.8%, or 3.7% including dividends.

Here’s how the 11 sectors of the S&P 500 have performed.

Philip Van Doorn, ‘Here are the stocks that have soared and sunk the most in 2019’ (MarketWatch, Oct 2, 2019) <> accessed 11 October 2019

With interest rates declining dramatically during Q3 as the Federal Reserve reversed course, it was not a surprise to see that the utilities sector performed best. Meanwhile, the market for initial public offerings has caught a definite chill. We Co, the parent of WeWork, postponed its long awaited IPO in the face of growing skepticism. Other recent IPOs including those of Uber, Lyft and Slack Technologies are trading well below their offering prices.


The S&P TSX rose 1.7% in September and is now up 19.1% YTD.

Canada’s TSX TR Index & Sectors September & YTD

Source: Holdun Trestle Management Inc., John MacDougall

The two heaviest-weighted sectors in the TSX- Financials at 32% and Energy at 17%- finally joined the party. The tech sector lost 5%. Gold slipped 3.5% on strength in the US dollar; materials gave up 7.5%. Healthcare was wounded again -7.5% on the back of weak Cannabis stocks and is now -5% for the year.


Global equity markets were tepid in Q3. Non-US stocks once again lagged US equities, and trade tensions exacted a toll in developed and energy markets. Latin America and India were the worst-performing regional markets, while Japan staged a late quarter comeback, turning the tide on its slow start to the year.

Brexit politics and uncertainty continued to weigh on UK and European stocks. Markets seem to be pricing in the likelihood of the UK leaving the European Union without a formal deal at the end of October.

How Did We Fare?

Year to date, the Holdun Canadian Equity (Model Portfolio) gained 20.7% (in CAD), which slightly outperformed the 19.1% rise in its Canadian benchmark. Over the nine-month period, the Holdun Canadian Equity’s relative performance was reduced by security selection within materials, consumer and telcos. Our lack of exposure to healthcare and our exposure to real estate had a positive impact on relative performance. During the same period, the Holdun U.S. Equity (Model Portfolio) gained 26.2% (in USD) and it outperformed its benchmark the S&P 500 Index, which gained 20.6%. The Holdun US Equity’s relative outperformance was aided primarily through security selection within consumer, financials and healthcare while somewhat offset within industrials and technology stocks. Exposure to healthcare and utilities reduced relative performance, while somewhat offset by our exposure to staples and energy.

The Way Forward

We continue to monitor global financial conditions for any signs of recession. We believe Canadian equity and international equity market still offer attractive equity valuations and we remain underweight in US equity. We are still concerned about a potential economic downturn which may be on the way. As such, we remain cautious on our asset allocation and believe a balanced portfolio still offers a compelling risk-reward profile.

Returns by Strategy for the YTD

Holdun Benchmark Alpha
Global Equity




Global Fixed Income




Global Balanced




U.S. Equity




Canadian Equity (in CAD)

20.7% 19.1%


Figures in USD except otherwise noted.