Hello. This is Jeremy Richardson from the RBC Global Equity Team here with another monthly update.

Now as March gave way to April, investors have been focusing on the quarterly earnings season and we’ve seen company fundamentals come to the fore and the power of the reopening trades that had been such the focus of attention back in March dissipated. That’s actually worked quite productively for stock pickers who, like ourselves, are focusing on those company fundamentals.

But one of the things that we’ve observed as the quarterly earnings season has progressed is that it’s almost as though investors have been putting more focus on the outlook statements and management forecasts of 2021 than they have on their historics. I suppose that makes some sense when you think that the historics are often reporting on a period which continues to be more heavily disrupted by the pandemic, but management teams, because they still have a high degree of uncertainty as to what the short term should look like, are not coming out with outlook statements and forecasts that are filling investors with high degrees of confidence.

And that’s led to some volatility in share prices that we’ve been seeing. In fact, a number of companies reported very good results, better than their expectations, yet nevertheless have seen their share prices fall. I think this speaks to perhaps some wider concerns that investors have as to what sort of perhaps the medium-term outlook looks like and, in particular, the path for inflation.

Now, many economists are saying that inflation in the near future could hit 3.5%. We know that many supply chains have had an element of disruption and that can be creating an element of cost pressure within the system. Yet, there is a sense that the central bankers are prepared to tolerate short-term higher rates of inflation because they feel that there continues to be significant amounts of spare capacity remaining in the economy, which means that those longer-term inflation targets are less likely to be compromised.

Nevertheless, as soon as we get to a 3.5% inflation number, I think more people will be looking to central bankers like the Bank of Canada who’ve already cut back on the amount of quantitative easing and wondering whether monetary policy will change. That might mean periods of volatility ahead as investors seem to pay a lot of attention to company cash flows, but we always have to worry about the discount rate, which brings that back into today’s money and net present value.

Over the medium to longer term, though, we continue to be of the opinion that these questions about monetary policy and the macroeconomic outlook are, for us, unintended sources of risk that create volatility. We don’t look to them to drive alpha. And instead, we focus our attention on those long-term company fundamentals because we remain convinced that, in the long term, it’s those company fundamentals that drive share prices.

So we stay true to that approach in the portfolio and I’m gratified to say at least whilst investors are focusing on company fundamentals, that does tend to create a more productive period for the stock picking.

I hope that’s been of interest and I look forward to catching up with you again soon.