The month of November provided a remarkable stock market recovery, as common stocks rebounded strongly, underscoring their resilience and continued upward momentum. All three ABC Funds exceeded their index benchmarks during the month, but more importantly we were particularly pleased with their year-to-date outperformance.

In November, numerous holdings within our ABC Funds portfolios reached new 52-week and all-time highs, significantly bolstering our results for the month. The market’s leadership was particularly strong in the technology and communication services sectors, areas where our portfolios are strategically overweight. This sector strength was exemplified by standout performances from Apple, Microsoft, NVIDIA, Amazon, Broadcom, ServiceNow, Visa, Mastercard, Adobe, S&P Global, Thermo Fisher Scientific, and Zoetis.

The market narrative for November was characterized by a confluence of positive factors: robust corporate earnings, a significant easing of inflationary pressures, and a substantial shift in interest rate expectations. Interestingly, the market has shifted from bracing for further interest rate hikes to now anticipating rate cuts in 2024. This realignment highlights the increasing confidence that monetary authorities have successfully steered the economy towards a soft landing. We believe that any reduction in interest rates will be enthusiastically received by investors, serving as a major catalyst for higher equity prices. Furthermore, these positive macroeconomic developments in the month of November effectively pivoted investor sentiment away from the pervasive pessimism of October and towards a more optimistic and opportunistic view.

As we enter the final month of the year, we see the combination of renewed investor confidence, traditionally lower seasonal volumes, and substantial cash reserves on the sidelines as precursors to a potential end-of-year rally, setting a favourable stage for 2024. Consequently, we remain fully invested and committed to our new value investment philosophy.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Navigating through the month of October, the markets faced a number of challenges, including rising yields, persistent inflation, and geopolitical turmoil. Despite these conditions, our three ABC Funds outperformed their respective benchmarks.

The completion of Microsoft’s $69 billion acquisition of Activision Blizzard, held in all three portfolios, marked an important development in the tech sector this month. Both were significant holdings in our portfolios and the takeover at $95 USD added to our October returns.

On the earnings front, a number of our core holdings, including Amazon, Meta, Microsoft, Visa, and ServiceNow, reported strong results and offered positive forward guidance. Additional portfolio outperformers included Broadcom, Adobe, Waste Management, and ASML.

As we look to the final months of the year, we are optimistic. Historically, November and December are strong months for the markets, and we believe current conditions have created attractive opportunities in equities.

Furthermore, we anticipate a stabilization in yields and subsiding inflationary pressures, creating a conducive environment for corporate earnings growth. Technological advances, particularly in AI, remain a focal point of our strategy, as we see these innovations driving future earnings and share price increases.

Our portfolios remain fully invested, reflecting our confidence in our strategy and outlook. We are committed to maintaining our focus on quality and performance as we close out the year.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Historically, September has never been an easy month for financial markets. It was no different for the month of September 2023. Market headwinds included the growing investor recognition of “higher for longer” interest rates, as well as the recent Federal Reserve comments interpreted as alarmingly hawkish. Additionally, the impending threat of a U.S. government shutdown, with its huge risks and repercussions, kept investor sentiment on edge.

While decelerating, inflation remains stubbornly above the Federal Reserve’s 2% target. This has encouraged the central bank to continue with its tightening efforts. Consequently, bond yields have climbed to levels not seen since 2007, contributing to the steepest drop in bond prices in nearly four decades.

Despite the pervasive negativity overhanging financial markets, we remain optimistic with regard to our diversified, large-capitalization portfolios. Common stocks appear technically oversold, which we believe sets the stage for a significant snapback rally, buoyed by solid corporate earnings and transformative innovations in technology including generative AI and digital transformation. Additionally, as we enter October, seasonal market trends are encouraging. In fact, the October to April period has a track record of delivering superior returns relative to the rest of the year.

In summary, although the challenges of August and September have priced significant negativity into the financial marketplace, we believe our portfolios are resilient and strategically positioned to capitalize on an eventual market rebound into year-end.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Our three ABC Funds generated positive returns during the month of August despite all major stock indices closing the month in negative territory. This outperformance was driven by a number of our common stock holdings including Amazon, Mastercard, Visa, Boston Scientific, Danaher, Thermo Fisher Scientific, Broadcom, Adobe, Autodesk, and Alphabet.

Of particular importance, NVIDIA stood out as our top common stock performer, reinforcing its longstanding position as a core holding in our ABC Funds. On August 23, the company reported exceptional second quarter earnings results, authorized a $25 billion share buyback program, and delivered forward guidance that shocked Wall Street. A cornerstone of NVIDIA’s success is their groundbreaking H100 chip, a pivotal asset in the race to build out large language models and generative AI capabilities. This chip offers unparalleled computational prowess, enabling a new generation of AI-powered solutions from autonomous vehicles and advanced language models to virtual reality simulations and precision medicine. NVIDIA founder and CEO Jensen Huang said it best in the earnings press release: “A new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI.” With numerous tailwinds in data center, automotive, professional visualization, and gaming, NVIDIA remains a prime ABC Funds holding.

Looking ahead to 2024, while many investors have been less sanguine on the North American economy and equities, the fact is most corporate earnings results have exceeded analysts’ expectations, inflation while not eradicated is decelerating, and there is now a sense that the U.S. Federal Reserve and the Bank of Canada have become less hawkish since the beginning of the year. Furthermore, we believe that any perceptible weakness in economic activity resulting in central bank ease could spawn a deluge of common stock buying. This event could easily take place before the end of 2023 or early 2024. Consequently, we remain optimistic and fully invested as we enter the final four months of the year.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

The strength of the equity market in the first half of 2023 continued into the month of July. Interestingly, this advance confounded many of the investment pessimists who have prognosticated an impending economic recession, given that both the Bank of Canada and the U.S. Federal Reserve increased interest rates during the month. Also notable during this period was Fed Chairman Powell’s statement that the Federal Reserve upgraded its 2023 economic forecast and does not anticipate a recession for the balance of the year.

Clearly, both the U.S. and Canadian economies have demonstrated remarkable resilience in the face of rising interest rates, significant recession concerns, and stubbornly high, albeit, declining inflation. However, a major positive factor that the pessimists are overlooking is corporate earnings results. For instance, over 70% of Q2 company results have beaten analysts’ expectations, including results from major corporations such as Caterpillar, Intel, Meta, Comcast, Alphabet, and General Electric. These results are impressive, and obviously, investors have taken note, pushing up year-to-date returns of the NASDAQ and S&P 500 over 31% and 19.5% respectively.

Our three ABC Funds provided notably positive returns for the month, and more impressively, excellent year-to-date outperformance. Individual ABC top performers this past month included: Adobe, Meta, Alphabet, NVIDIA, Activision Blizzard, Zoetis, Danaher, Becton Dickinson, Thermo Fisher Scientific, ServiceNow, and Autodesk.

Now entering the last five months of 2023, we remain optimistic with our diversified portfolios and anticipate positive results to year-end.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

North American equity markets extended their upward ascent during the month of June and ended the first half of 2023 well into positive territory. This appreciation occurred despite continued central bank interest rate hikes, economic uncertainty, persistent global inflation, and an opaque corporate earnings landscape.

Remarkably, equity markets have continued to climb the proverbial “wall of worry”, with the S&P 500 rising over 15% and the Nasdaq Composite increasing over 31% for the first half of 2023. This performance defied all bearish prognostications, demonstrating the strength and resilience of the markets. Most noteworthy, it appears that there is still significant investible cash sitting on the sidelines anxiously awaiting a wishful market selloff. This did not occur during the first six months of 2023.

Our three ABC Funds capitalized on the positive momentum in June, posting excellent returns and adding to our impressive year-to-date results. In particular, three sectors lifted our performance: information technology, communications, and consumer discretionary. Other positive factors included:

• Prioritizing U.S. equities versus Canadian equities
• Focusing on large capitalization securities
• Maintaining fully invested portfolios
• Our U.S./Canadian dollar hedge to mitigate currency risk

Particularly notable was that our top three ABC Funds holdings, Apple, Microsoft, and NVIDIA reached new all-time highs during the month of June. Additional contributors to our performance included: Adobe, Becton Dickinson, Broadcom, S&P Global, Meta, Honeywell, Amazon, Mastercard, Visa, and Waste Management.

Looking ahead to the second half of 2023, we remain very optimistic and expect North American equity markets to continue scaling the “wall of worry” to higher levels. Our ABC portfolios are well diversified, and we believe their composition positions them favourably to navigate an evolving market landscape.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Our three ABC Funds significantly outperformed their index benchmarks during the month of May. This positive result can be largely attributed to the Funds’ portfolio overweighting in two top performing sectors – information technology and communication services – and notable geographic concentration in American equities accounting for 70-85% of our common stock exposure.

Apple, Alphabet, Broadcom, Meta, Microsoft, and NVIDIA were key contributors to our success due to stellar quarterly earnings results and the market’s realization of their significant future growth prospects in generative AI. This is understandable given our front page editorial in our January 2023 ABC Perspective which emphasized that:

“… we believe that we are presently on the verge of a Cambrian explosion of innovation that will dramatically alter our lives and elongate the secular bull market in equities for years to come. In particular, we see artificial intelligence (AI) as the principal agent of technological advancement and the overarching theme in the next leg upward for common stocks. In this regard, AI technology has the potential to reshape the world, boost productivity, and elevate corporate profits. For instance, AI will power self-driving cars, robotics, virtual/augmented reality, simulations, genomic sequencing, and new drug discoveries. Our portfolios are well positioned to take advantage of secular themes in technology, including AI, via core holdings such as Apple, Microsoft, Amazon, Alphabet, NVIDIA, and Thermo Fisher Scientific.”

Capitalizing on a number of common stock outperformers, we tactfully rebalanced our portfolios to add new positions in ASML, ServiceNow, and Canadian Pacific Kansas City. Looking ahead, we remain extremely confident with our three well-diversified portfolios and expect their positive performance to continue throughout 2023.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

During the month of April, the North American equity markets continued their impressive climb upwards, defying the predictions of many investment pessimists who had forecasted lower corporate earnings results, higher U.S. Federal Reserve administered rates, and an impending economic recession.

The equity markets instead showed remarkable resilience, with this overhanging investor pessimism appearing to have been a contrarian market indicator, as the major stock market indices have ascended the proverbial “wall of worry”.

Interestingly, the indices were driven higher in April due to the outperformance of large cap information technology stocks and ABC Funds’ favourites including: Microsoft, Meta, and Alphabet, which all delivered better than expected corporate earnings results.

Additionally, our portfolios benefited from the impressive performance of Becton Dickinson, McDonald’s, Zoetis, S&P Global, Mastercard, Honeywell, and Boston Scientific in the United States, and TC Energy and Enbridge in Canada. In a number of cases, these holdings are reaching new 12-month and all-time highs.

This outperformance led to our three ABC Funds posting positive returns during the month of April, but more importantly impressive year-to-date investment performance.

With the completion of the first four months of 2023, we remain fully invested, expecting a continuation of the positive market trends to year end and beyond.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

In March, global securities markets were influenced by substantial financial and economic news flow, such as the unforeseen regional banking crisis, which triggered massive deposit withdrawals resulting in a concerted rescue action by several big money centre banks and various U.S. government authorities.

This precarious setting, along with the pre-existing interest rate uncertainty, enervated investors and compounded the gloomy investment sentiment, despite a benign macro economic outlook. As a contrarian indicator, this bearish overhang presented as a bullish bellwether.

In the face of the overall market negativity, our ABC Funds exhibited exceptional outperformance for the month of March and their year-to-date benchmarks. This performance can be attributed to four appreciating sectors and specific ABC Funds’ holdings in consumer discretionary, healthcare, communications and information technology. ABC Funds’ standouts included Amazon, McDonald’s, Becton Dickinson, Boston Scientific, Thermo Fisher, Activision Blizzard, Alphabet, Meta, Adobe, Apple, Broadcom, Microsoft, and NVIDIA.

As we enter the second quarter, we anticipate the stock market recovery to continue, underpinned by economic resilience, strong corporate earnings, and moderating inflation.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.

Despite the early month optimism, North American equity indices slid into negative territory by the end of February. This decline was mostly due to lingering concerns about elevated inflation, U.S. 10 year treasury bond yields creeping towards 4%, and ongoing restrictive central bank monetary policies. Surprisingly robust North American economic activity and employment data also contributed to the decline.

Notably, with growing investment interest in large language models and generative artificial intelligence (AI), our three ABC Funds outperformed their respective benchmarks in February. This was due to the exceptional performance of two key investment holdings: NVIDIA and Meta, held in all three ABC Funds.

During NVIDIA’s earnings call on February 22nd, CEO and company founder, Jensen Huang made a significant statement regarding the current state of artificial intelligence: “AI is at an inflection point, setting up for broad adoption reaching into every industry. From startups to major enterprises, we are seeing accelerated interest in the versatility and capabilities of generative AI.”

While our portfolios are well-diversified, they are positioned to capitalize on AI’s tremendous growth potential, anchored by industry leaders leveraging the power of AI to drive transformative innovation, increase productivity, and boost corporate profits.

Looking ahead, our outlook remains optimistic regarding the North American economic and investment prospects for 2023. As a result, we expect common share prices to saw-tooth their way to higher levels.

Irwin A. Michael, President
I.A. Michael Investment Counsel Ltd.