Given the uncertainty in equity markets, Gord O’Reilly, lead manager of the 4-star rated $103.2 million Steadyhand Equity, is being a little more cautious than usual. Besides running about 6% cash, O’Reilly and his team are positioned defensively and favoring holdings that are either negatively correlated with markets or have the strength and resilience to ride out a potential market decline.
Chief among O’Reilly’s concerns that the markets are vulnerable to a correction, is the slowdown in earnings. “Coming off President Trump’s tax cuts in 2018, where the S&P 500 earnings were up about 18% year-over-year, this year second quarter earnings are down about 2.7%, year-over-year. Earnings revisions for Q3 and Q4 are negative,” says O’Reilly, vice-president and senior portfolio manager at CGOV, a unit of Montreal-based Fiera Capital Corp. “Sixty percent of U.S. corporations that have reported have taken down guidance for the last two quarters. As fundamental investors we like to invest in companies where earnings are going up. The stock market is at all-time highs and earnings are going down—that’s of concern to me.”
