Andrew Pyle, portfolio manager and senior investment advisor at CIBC Wood Gundy.The Globe and Mail
Sign up for the Globe Advisor weekly newsletter for professional financial advisors on our sign-up page. Get exclusive investment industry news and insights, the week’s top headlines, and what you and your clients need to know. For more from Globe Advisor, visit our homepage.
Some market watchers have downgraded their forecasts for the number of interest rate cuts coming this year from six or seven to two, or maybe even none. However, money manager Andrew Pyle is sticking to his initial prediction of two or three cuts for 2024.
“Earlier this year, we were in the minority because of how few cuts we anticipated, while now we’re in the minority on the other side,” says the portfolio manager and senior investment adviser at CIBC Wood Gundy, who oversees about $240-million in assets.
He believes the Bank of Canada will be more pro-active with rate cuts while the U.S. Federal Reserve Board may be more reticent to make major monetary policy changes ahead of that country’s fall presidential election.
“We’ll see what the economic numbers show in the coming weeks, but there’s a lot more flexibility for the Bank of Canada to adjust to lower rates in response to weaker economic signals,” he says.
Meanwhile, Mr. Pyle remains broadly diversified in his portfolios to keep his investors prepared for whatever comes next. His balanced portfolio, which includes about 50 per cent equities and 50 per cent fixed income and cash, returned roughly 5 per cent to 7 per cent for the past 12 months, as of March 31. The performance is based on total returns net of fees.
The Globe and Mail spoke with Mr. Pyle recently about what he’s been buying and selling.
Describe your investing style.
We customize our portfolios based on each of our client’s objectives, such as investment timelines and risk tolerance. We start with a macroeconomic view of markets and then select individual securities, including stocks, bonds and exchange-traded funds [ETFs] or mutual funds. Our investment decisions are based on both fundamental and technical analysis. We also hold about 10 per cent cash (such as high-interest savings account vehicles) for safety and to take advantage of buying opportunities. Our current cash position is slightly above average, at about 12 to 15 per cent.
What’s your take on the current market environment?
The market has proven to be resilient even in the face of disappointment. In December, the expectation was for six or seven interest rate cuts in 2024. Today, the expectation is for two or three or maybe no rate cuts until next year. Despite that downgrade, the market hasn’t capitulated to the extent where we’ve seen a 10-per-cent to 20-per-cent correction. That speaks to the positive fundamentals that still exist in the economy. We think the greatest risk to the markets outside of geopolitical concerns is a reacceleration in inflation. There’s also a risk that we will enter a recession in 2025 because rates are too high.
What have you been buying or adding?
We’re starting to add more emerging market exposure, including to countries such as China and India, after largely avoiding it for many years. We think Chinese growth has finally turned the corner and will accelerate this year. India’s fundamentals remain sound and should see increased foreign investment. We’re buying into these markets using low-cost passive ETFs from large, well-established, well-capitalized providers. Examples include Vanguard FTSE Emerging Markets All Cap Index ETF VEE-T and Vanguard FTSE Developed Asia Pacific All Cap Index ETF VA-T.
We’re also increasing our U.S. exposure. Relative to Canada, we still see stronger growth prospects in the U.S., with technology remaining a key driver. We’re buying small- and large-cap companies using vehicles such as Canadian-dollar hedged ETFs and Canadian depositary receipts. Some sectors we own in the U.S. include technology, banks and health care. Some examples of stocks we own include Intel Corp. INTC-Q, Microsoft Corp. MSFT-Q and Pfizer Inc. PFE-N, to name a few.
What have you been selling or trimming?
We sold Tricon Residential Inc. TCN-T shortly after Blackstone Inc. BX-N announced in January that it was taking the company private. We bought Tricon last year on the thesis that residential rental demand would increase, which it did. We decided to sell when the deal was announced because we didn’t expect more returns before it closed. We also wanted to avoid potential currency risk, specifically if the Canadian dollar moved higher before the deal closed.
We also sold Teck Resources Ltd TCK-B-T last summer after the stock ran up owing to speculation about the sale of its coal business. We would have made more had we waited a bit longer, but we didn’t want to risk losing the return we had already made on the stock.
What stock(s) do you wish you had bought?
In hindsight, I wish we had invested more in the technology sector at the end of 2022 and stayed in it longer in 2023 instead of taking profits last year. We missed the August to October selloff last year, which was good, but then we missed the move up in the sector at the end of last year.
What advice do you have for new investors?
Investing doesn’t have to be complicated, especially if you can take advantage of the power of compounding over time. It doesn’t mean your portfolio should be on cruise control, but start investing in a few single stocks or diversified, low-cost products such as ETFs. Then, once your portfolio starts to grow, you can broaden your asset mix.
This interview has been edited and condensed.