January 2024 – Lucky Number Seven

Lawren Harris

We built Inukshuk Capital Management to serve the needs of clients looking for a unique approach – void of conflicts of interest, commission sales and pushed products. We began by putting our own money where our mouth is. With low fees and active risk management, we help families achieve financial longevity, that’s the bottom line.

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January 2024: Lucky Number Seven

In this issue:

  • Global Equity Market Performance
  • Magnificent Seven
  • Magnificentest (?)
  • Oh Canada
  • What You Need
  • Wrapping Up
  • Health is Wealth

Global Equity Market Performance

December followed up on November’s strong performance although at a somewhat slower pace.

The S&P 500 and the S&P/TSX60 were up around 4% while MSCI EAFE added just over 3% and Emerging Markets closed about 1% higher.

The S&P 500 had a dismal 2022, down 19%, and then rallied 24% in 2023 to finish where it started two years ago. The S&P/TSX 60 was up 12% on the year and 5% since 2022, so it has outperformed with less volatility.

 That wasn’t the case in 2023 – more on that below.

We remain fully long the S&P 500 and S&P/TSX60.

If you would like to stay current on our measures of trend and momentum in the markets we follow, please click here .

Magnificent Seven 

Since nothing about human nature and Wall Street really changes here we are with a new ‘brand’. In the late 1960s a group of 50 large cap stocks were informally named the Nifty Fifty. These were ‘blue chip’ companies you had to own and never sell.

About ten years ago four stocks – Facebook, Amazon, Netflix and Google – were given the moniker FANG. ‘The Four Horsemen’ was not under consideration, apparently. A couple more were added to this group over the years – Microsoft and Apple.

Two have since changed their names so the acronym doesn’t work anymore. And one, Netflix, has been tossed out of the old gang and replaced by the new cool kids on the block: Nvidia and Tesla.

ANTMAAM doesn’t sound as, umm, impressive as FANG. Although it may be up for grabs as a new Marvel character. Over the past year or so ‘The Magnificent Seven’ was coined. These have been designated as the dominant mega cap stocks that rule everything – they had quite a year. The Nasdaq 100 was up 52%. The seven comprise almost 40% of that index and over 25% of the S&P 500.

Magnificentest (?)

Depending on the day, either Apple or Microsoft are the largest market cap stocks in the world. They are the magnificentest of the seven. As of January 11, Apple is the leader at almost 2.9 trillion US dollars.

A little perspective is in order when you see these kinds of numbers.

The entire market cap of the biggest index in Canada, the S&P/TSX Composite, is just over 3.3 trillion Canadian dollars. At the current exchange rate that is 2.5 trillion US dollars.

Makes you think.

Oh Canada 

As stated above, Canada has outperformed the US over a two year period. The past year has been the opposite. The implication of such dominant performance in the technology sector is that the S&P/TSX 60 underperformed the S&P 500 by 9% in 2023.

Canada’s largest stock index is very underweight technology. There is only one tech company in the top ten – Shopify. The rest is dominated by banks, transportation and resource companies.

So what to do?

A few months ago, considering our systems were constructive on both markets – although the S&P/TSX 60 was looking a little shaky at points – we tweaked our buy and hold allocation in North American equities a bit in favour of Canada. This isn’t a grand call of some kind. It is a diversification of risk while maintaining our target weight in stocks.

What You Need

One of the more interesting stories of 2023 was the performance of staples – they went nowhere. These companies make the things you need. For example: Proctor & Gamble, Coca Cola, and Target were all down.

XLP, the staples sector index ETF, lost almost 1%.

That is just one year. Let’s go back more than 20.

Looking at the Nasdaq 100 versus staples we see that the relative price is back to levels not seen since March 2000. Will this trend continue? We have no idea. It’s worth noting that March 2000 was an important moment in tech – the peak of the dot-com boom.

So what to do? Turns out – nothing.

We own True Exposure’s Exogenous Risk Pool – a liquid alt mutual fund we designed and manage. It is a systematic program that employs the relative performance of staples to the tech-heavy discretionary sector as a signal.

The strategy’s current positioning will have an edge over the broad market if there is some mean reversion in the relative performance of staples. Of course we have no idea if this will happen but considering recent price action the risk-reward set up looks favourable.


Wrapping  Up

Canada has its own Magnificent Seven. But in Canadian style they are simply: The Group of Seven. The painting above is Lawren Harris’ House in the Ward, Winter, City Painting No. 1.

Regardless of your thoughts on winter, if it has to be winter then a little snow would be nice. And sun. A little sun would be good.

Happy New Year

Health Is Wealth

Your Magnificent Seven

In the unfolding days of January, a clean sleight of possibilities emerges—a time for reflection on where we stand and where we aspire to be. While grand resolutions are being made, let’s not overlook the value of small, incremental changes that often lead to transformations. Recognizing that significant change can spring from modest beginnings, let’s embark on a journey of incremental improvement. Instead of adhering to a rigid formula, consider these seven small, yet impactful practices to make 2024 a year of personal growth and well-being.

1. Start Your Day the Right Way:
Treat your morning routine as a clean sleight for positive change. What small adjustment can kickstart your day on a positive note? Whether it’s a brisk five-minute stretch, a moment of mindfulness, or a nutritious breakfast, setting the right tone in the morning can shape the trajectory of your entire day.

2. Incorporate Movement into Your Day:
Physical activity doesn’t always have to be a structured workout. Seek opportunities for movement throughout your day—take short walks, opt for the stairs, or indulge in brief stretching sessions. Cultivate a habit of consistent, low-impact movement that seamlessly aligns with your lifestyle.

3. Nourish Your Mind:
Find ways to exercise your mind regularly. Whether it’s dedicating time to read a chapter, acquiring a new skill, or engaging in a stimulating hobby, nurturing your mental well-being in small, consistent doses can pave the way to a more fulfilling and enriched life.

4. Embrace Stillness:
Amidst the hustle and bustle, finding moments of stillness is crucial for mental clarity. Incorporate brief pauses into your day—moments of meditation, deep breathing, or simply being present. These moments of calm can clear your mind and contribute significantly to your overall mental and emotional well-being.

5. Energize Your Circle:
Take stock of the people in your life. Identify those who uplift and energize you. Surrounding yourself with a positive and supportive circle can have a profound impact on your overall well-being.

6. Make Small Dietary Changes:
Rather than attempting drastic diet overhauls, consider small, sustainable changes. These can include incorporating an extra serving of vegetables, choosing water over sugary drinks, or cutting out unhealthy snacks. Small modifications in your dietary habits can lead to significant health benefits over time.

7. End Your Day on a Positive Note:
Reflect on your evening routine. Establish a calming ritual, such as a soothing bedtime routine or disconnecting from screens before sleep. Ending your day on a positive note not only promotes restful sleep but also sets the stage for waking up rejuvenated and ready for a new day.

Transformation begins with intent. Embrace the desire for positive change and let these small steps become the catalysts for a happy, healthy and prosperous 2024.

‘You have to sustain it, to maintain it’

Victoria Bannister
ICM Health Ambassador

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