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Liis Palmer, Cassels Investment Management Inc.

Global Balanced Fund

The Brexit vote has caused uncertainty in the markets. The British pound dropped substantially and markets fell on Friday. Economists are reducing forecasts for global economic growth. Lower economic growth will likely affect commodity prices and also the C$. Though each shock is different, we note three recent market disruptions: Japan’s March 2011 earthquake, the US debt-ceiling confrontation in August 2011 and the 2012 euro zone recession set off by the debt crisis. In each situation, the market fell by more than 11 percent. In all three cases, stocks rebounded to their pre-crisis levels in three or four months. (Kleintop, Chief Global Investment Strategist, Charles Schwab & Co.)

Last week the MSCI World Index returned -1.6 percent. The Marquest Global Balanced Fund A units closed at $16.64 compared to $16.83 the previous week (-1.1%). Acute moments in history are never good times to make significant changes to the portfolio. As well, investors tend to over react and sell down good quality securities. We have added to our cash position (we sold Ryannair) and decreased our C$/US$ hedges in order to take advantage of buying opportunities and potential weakness in the C$. Our positions in Europe have been relatively small. We will watch for opportunities to add to our positions in names like Diageo which should be a beneficiary. Scotch accounts for 24% of its sales and production and storage costs and incurred in the UK. Only 6% of sales are in the UK. We will also watch for buying opportunities in names like HCA Holdings, a domestic US hospital company. It is possible that stocks that are relatively unaffected by European issues will be good buys as the markets gyrate with the big European news. We remain true to our investment strategy of buying fundamentally good businesses at good prices.

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