The stimulative environment and the lack of spending historically in these sectors provide strong support for the underlying commodities. Again, our preference for is for the base metal sector over oil and gas, however energy stocks are trading at historical discounts that will provide room for stock appreciation if drilling continues to be diminished. Gas names will see a structural change in the supply and demand as the associated gas coming from oil drilling in the Permian will no longer be a factor.

The Canadian Small Cap index has been in a negative technical environment since 2010. Measuring the move in the SPTSX Small Cap Index in 2020, the relative underperformance of small cap versus large cap stocks has been broken. This sets up the portfolio for a positive environment for stock picking and small caps in Canada. As the chart below highlights, the S&P TSX small cap index is technically positioned to outperform the TSX composite by 10% in the near term, and by 20% to 30% if the technical trends continue to 2010 and 2007 levels.

Finally, we would like to thank you for your support over the last several years, and we would like to wish you a healthy and positive 2021. If there are any questions or comments, please do not hesitate to contact us.

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