Financial letter

November 1st, 2023

Volume 14 Number 4



Hello everyone,

The third quarter, which ended on September 30, saw the various North American markets redirect and move downward. We obviously positioned our strategies based on this anticipated movement. However, before going into more detail about our reading of the markets, I would like to start this segment with a recent conversation I had with an esteemed client. He said to me: “Martin, it’s all well and good for you to tell me that we perform better than elsewhere when things aren’t going well, but we haven’t made any money in 18 months, and that’s what’s important to me.” He’s certainly right. The equity portion of our portfolios translates into an annualized gross return of 6% over 5 years and 9.5% over 10 years, but only 2.3% over 1 year, whereas bonds are continuing to fall, resulting in disappointing negative returns over the past 2 years. The problem with the markets is that it is impossible to know the magnitude of the corrections or how long they will last. It was only in 2013, 13 years later, that the S&P 500 in the U.S. Would significantly break through its high in March 2000. For its part, the Japanese market, by using the exchange traded fund EWJ (in USD), is still below its 1994 price.

That being said, the beauty, if not the benefit, of active management is that it is fortunately possible to remain underweight in certain asset classes. In addition, even when markets are stagnating, there are still opportunities in specific sectors. It is therefore my opinion that although the various stock market indices and our clients’ portfolios have been in negative territory since January 1, 2022, our approach will continue to stand out, in particular by potentially reducing the downward volatility of portfolios at a critical time.

In this bulletin, we will first present our views on bonds and fixed income securities, and then review our private management decisions and the changes made to asset class weights. As usual, I will conclude with our market outlook and our largest positions.

However, before going any further, I would like to announce that Rivemont Assurances has entered into a referral arrangement with a major mortgage brokerage firm. This is another string to our bow for our clients’ financial well-being. Please feel free to contact us when buying a home or renewing your mortgage. It is important to take the time to negotiate your mortgage rate properly, especially at a time when interest rates are high. We will be happy to refer you to a knowledgeable and courteous professional.

Good reading.


Fixed Income


You can’t always be right or always be wrong, but here we’ve certainly added definite value by deciding to cut our bond exposure by 50% last year. However, the situation has changed considerably since then, and we are now in the reverse position, while being currently overweighted in fixed income, but differently. How did we get there?

Note that we are currently experiencing the fastest rise in interest rates in over half a century.




This unusually high rise created chaos in the fixed income universe. While some parts of the scale have benefited, others have not. The second category definitely comprises long-term government bond holders. I’m showing you here the curve of the TLT exchange-traded fund, U.S. treasury bonds, over 20 years. It can be seen that the loss is close to 50%, which is unprecedented in the generally calmer world of bonds.

This unusually high rise created chaos in the fixed income universe. While some parts of the scale have benefited, others have not. The second category definitely comprises long-term government bond holders. I’m showing you here the curve of the TLT exchange-traded fund, U.S. treasury bonds, over 20 years. It can be seen that the loss is close to 50%, which is unprecedented in the generally calmer world of bonds.


Source: Tradingview

In addition to this decline, there was also a rates curve inversion, meaning that short-term interest exceeds long-term interest




It is currently possible to get a good return without taking undue risk by staying with short-term maturities, which we are doing a lot of right now with many of our clients’ portfolios.

We may be at the top of the rate cycle, although there is no guarantee, and that is why a diversified income portfolio probably presents the optimal mix. The current composition of this portion of our portfolios is as follows:

20%     –           National Bank structured note, 5.25%

50%     –           ETFs, high interest, short term

10%     –           ETFs, high interest, short term, USD

20%     –           ETFs, Canadian bond universe


Stock Markets


Designed to provide comprehensive exposure to U.S. equity markets, the Russell 3000 Index measures the performance of the 3,000 largest U.S. publicly traded companies. It covers more than 95% of U.S. public companies.




The capitalization-weighted version currently shows -15% since the beginning of 2022 and close to -20% for the equal-weight version. And the Canadian market is not much better.

While markets are difficult to predict, we believe that a defensive approach is warranted. To take advantage of opportunities, you need to wait for them to arise. While we are currently invested at 60% of our equity target, we may quite likely fall to 50% in the coming weeks based on economic conditions.

In a video that is very popular on social media right now, Oracle Warren Buffett explains why he likes 50% market declines that enable him to take advantage of the associated opportunities. I can say with certainty that none of our clients is particularly fond of 50% drops in the equity market. We will certainly take advantage of the opportunities that present themselves, but not without having strongly eased the downturn if it does occur. And since the fixed income market is now giving us a return of over 5%, the sidelines market is having less of an impact on portfolios.

However, when I state that there will always be opportunities, this may soon be the case in the gold sector. We tested the waters a few quarters ago, but we are still waiting for the next high above $2,100 USD. We’re almost there!



Market Prospects



Favorite Securities


You will find below a list of the individual securities with the largest weight in our “growth” portfolio. These stocks were selected based on their respective potential to outperform the stock market. You will find a short description of their activities, the annual dividend, if any, and the total return since their first inclusion in our portfolio.





In closing, I once again invite anyone interested in learning more about finance to read my monthly commentary in Les Affaires:

I am also active on X (Twitter) to comment on financial news.


Martin Lalonde, MBA, CFA



The information presented is dated September 30, 2023, unless otherwise specified and is for information purposes only. The information comes from sources that we deem reliable, but its accuracy is not guaranteed. This is not financial, legal or tax advice. Rivemont Investments is not responsible for errors or omissions with respect to this information or for any loss or damage suffered as a result of reading it.

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