Although discouraging, we believe the most recent pull back is a buying opportunity given the extreme valuations. The TSX Small Cap has been consolidating for the last two years and appears oversold from a technical perspective (see chart below).

The largest risks to the portfolio continue to be US Dollar strength, a weaken Chinese economy, and global central bank tightening. However, we believe these risks are overblown. As the charts below highlight, these risks appear to be priced into Canadian small cap stocks and poised to reverse.

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