Investment Commentary and Outlook


July 2024


Despite the headlines of all-time highs in indices such as the S&P 500, many North American equities have struggled over the past three months after a promising start to 2024. This situation is being driven in part by the surge in mega-cap stocks like Nvidia (NVDA).

In the current environment, investors are understandably wrestling with sticky inflation and higher borrowing costs, looking for signs that the economy is cooling without falling into recession. Unlike in Canada, where higher interest rates have affected adjustable rate mortgages, many Americans have locked in long-term fixed mortgages at historic lows. As a result, US policy-makers have struggled to rein in consumer spending and inflation.

However, in a sign that higher interest rates may finally be having the desired effect, the US recently reported its ninth consecutive week of rising jobless claims and also indicated that wage growth is slowing. In addition, certain sectors of the economy, such as retail, are feeling the inflationary pinch as consumers rein in their spending. In response, Federal Reserve officials have begun to openly discuss the need to lower interest rates. On the positive side, unemployment remains contained and a “no landing” or mild recession scenario remains reasonable.


Well-funded companies continue to execute against their plans, regardless of investor fears of a near-term slowdown or the outcome of elections in the US and Europe. Moreover, while the shifting sands of the economy are difficult to navigate and predict, change and disruption create opportunities, not just challenges.

For example, as more consumers seek discounted products, Pembroke recently invested in a closeout retailer in its core US equity strategies. Similarly, the firm’s holdings exposed to artificial intelligence have outperformed as companies around the world invest heavily in this new technology. In Canada, companies that compete with the big banks to finance consumers looking for low-cost loans and mortgages are also showing impressive growth.

Macroeconomics and Equities

From a macroeconomic perspective, the prospects for falling inflation and interest rates bode well for equities, which could benefit from expanding valuations and a reacceleration of economic growth as monetary policy-makers take their foot off the brake. Turning points in equity markets are difficult to call, but at this point it feels like a matter of when, not if, the interest rate backdrop becomes more accommodative to growth and investment.

As always, Pembroke encourages investors to take a long-term approach to investing as well as to build portfolios that reflect their financial goals and risk tolerance.


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This report is for the purpose of providing some insight into Pembroke and the Pembroke funds. Past performance is not indicative of future returns. Any securities listed herein, are for informational purposes only and are not intended and should not be construed as investment advice nor is it a recommendation to buy or sell any particular security. Factual information has been taken from sources we believe to be reliable, but its accuracy, completeness or interpretation cannot be guaranteed. Pembroke seeks to ensure that the content of this document is correct and up to date but does not guarantee that the content is accurate and complete and does not assume any responsibility for this. Pembroke is not responsible for decisions or actions taken or made on the basis of information contained in this document.