2019 Outlook Retrospective

For completeness, let’s quickly review our 2019 outlook and examine how we did. Of course, our outlook is only relevant in the context of making our clients’ money so that is the lens through which we will view our predictions. If you recall, this outlook was provided followed the worst quarter for equity markets in 10 years (the 4​th​ quarter of 2018).

What we said…

What happened…


“We do not see any other convincing indicators to suggest a recession is imminent and thus we believe the strong employment levels in the U.S. will provide for additional profit growth and share price increases for some time to come.”

The U.S. Unemployment rate continued to fall (headline rate falling from 3.9% in Dec ’18 to 3.6% in Oct’ 19. U.S. markets rallied strongly throughout the year.


Markets rallied even more than we could have predicted but the resiliency of the U.S. market and some help from the Federal Reserve kept the economy moving forward, avoiding a feared recession.

“The U.S. typically runs a budget deficit, which proves beneficial given that the inherent strength of the U.S. dollar creates positive borrowing conditions. This additional liquidity is helpful to the economy in the short term, but there is a growing risk that GDP growth may not be sufficient to sustain current deficit levels.”

The U.S. deficit ballooned to 5% of GDP, swelling by over US$300B. While spending undoubtedly aided GDP growth, there has been no change in government spending attitudes as the budget is projected to remain at a high level for 2020/2021 despite meagre GDP growth.


The U.S. deficit continued to grow. Currently, the risk to deficits and the funding of seemingly unlimited debt is politicians believing that unlimited resources through money creation and deficits can continue indefinitely.

“Central banks are winding down Quantitative Easing, removing excess liquidity at a time when interest rate hikes are already straining the markets.”

The Fed was forced to cut interest rates, fueling a rally in the stock market. After a mid-summer sell-off, additional Fed liquidity was needed to support the repo market.


We did expect that cutting back on liquidity would impact markets (more details in our outlook). We did not expect the Fed to cut interest rates 3 times, providing new liquidity to markets.

“Oil prices remain range-bound between US$45-60 per barrel. Long term investments in traditional energy will be underwhelming.”

Oil prices did rise, albeit a bit more than we anticipated ($US58-64/bbl). However, oil price sentiment and challenging operating conditions led to continued underperformance of energy equities.


We did not foresee the extent of the strength in oil prices. However, we were successful in minimizing our energy exposure.

“Canadian dollar weakness persists versus the $USD, remaining rangebound between US$0.72-0.78”

While the performance of the Canadian dollar versus the U.S. dollar was not out of the expected range, the Canadian Dollar was the best performing major currency.


The CAD mostly traded in the upper half of the range and therefore could not be characterized as weak. Note that a strong CAD negatively affects performance of $USD assets for Canadian investors.

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