Current Commentary: 

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• In 2025 the broad equity markets both in Canada and the U.S completed their third straight year of double digit returns, powered by a resilient economy (especially in the U.S.) and significantly increased corporate earnings. The S&P 500 (by far the largest stock market in the world) ended the year up 17.9%. In Canada, driven mostly by the financial sector and resources, the TSX was up 31.7%.

• In the States, somewhat remarkably, profit margins have continued to expand—to 13.1% in the third quarter of 2025, the highest in 15 years (source FactSet). One would have thought that inflation in companies' costs colliding with a straitened consumers' resistance to price increases would have been a significant headwind here. So far, at least, one would have been quite wrong.

• In Canada, since mid 2024, our central bank has reduced interest rates seven times. In the U.S, after six straight rate cuts, Federal Reserve monetary policy is 1.75% lower than it was a year ago, even with sticky CPI inflation in the U.S. still pushing 3%. It seems more than reasonable to expect the lagged effects of all this easing to begin showing up in 2026. We believe there's good information in this for us. To wit, the economic/financial “news” we get tends to skew overwhelmingly to the negative by conscious design. As one of my favourite market commentators, Barry Ritholtz, writes, “I continue to advocate that investors must manage their information consumption aggressively: filter out the noise that is misleading, irrational, and not data-driven”.

The fact remains that a very strongly rising equity market may (and indeed should) have taken the above date points into account—and maybe then some. Thus, the burning question all year long was “Are we in an AI bubble?”. This replaced the previous year's burning question “When and by how much will central banks from around the world cut rates?” or which, in turn, replaced 2023's “Will there be a recession?”.

There was no recession, but that's beside the point, which is that the universal burning question is usually, if not always, the wrong question, and a distraction to the well diversified long-term investor -like us.

There can be no question that the S&P 500 is more heavily concentrated in a few huge tech stocks—which can't all be going to win the AI race—than it's ever been in our investing lifetimes, and that this concentration has the Index selling at a price/earnings multiple in the neighbourhood of its historic peaks.

Our response to this is twofold: (a) valuation is not, never was and never will be an effective market timing tool and, (b) your imminent portfolio rebalancing will address this issue forcefully.

All of this suggests to us that the next significant market shock—and there always is one as they come along with almost the frequency of the crosstown bus—will probably come out of deep left field (in the jargon, an “unknown unknown” as opposed to a “known unknown” like valuation or the national debt). And like all the past shocks, and all those yet to come, it will have very little to do with us other than as a potential bargain-hunting exercise.

We are following a plan that has always worked in the very long run, in that it has ultimately achieved the goals of investors like us. We do not accept that “this time is different” regardless of what “this” may be at any given moment. And thus we don't adjust our strategy to accommodate the fads or fears of that moment. We don't go to cash during market panics, and we don't bet the ranch on “new era” miracles…like AI.

We wish all our friends and clients (by conscious design they are usually the same 😊) a healthy, happy and prosperous 2026. We're always here to address your questions and concerns. Thank you for being our clients. It is a privilege to serve you.