Foresight - Fall 2026

Navigating the New Paranormal

Capital markets have been very rewarding for our clients’ portfolios over the last one, three and five years. The most difficult hurdle over the last two years is tuning out the daily cycle of media noise surrounding what we call in house “the apocalypse du jour”. While there is no shortage of things to worry about, corporate earnings remain strong, underpinning the growth in global equity markets. At July 31^st our clients’ equity portfolios returned approximately 31% on a trailing twelve-month basis, while fixed income portfolios had a return of approximately 2.5%. While capital markets have been very rewarding over the last 5 years despite there being no shortage of worries looking back, the question on investors’ minds is where do we go from here? To look forward, we will first revisit the global growth themes we first introduced in Foresight’s Winter 2022 edition, and then again in the Fall 2024 and Fall 2025 editions.

Four years later, our major growth themes all remain intact: (1) capital spending in Renewable Energy to meet surging electricity demand, (2) investment in Manufacturing Automation to offset declining workforces due to aging demographics, (3) Infrastructure Spending to replace aging bridges, roads, water and sewers, (4) New Technology (AI) continuing to allow us to do more with less and finally (5) Deglobalization/Regionalization to ensure security of critical supply chains, especially in food, healthcare and technology. Combined, these are very powerful drivers of global economic growth and corporate earnings growth. The road to achieving these objectives may not always be smooth. The current US Administration’s policy to use import tariffs to stimulate growth in US manufacturing and employment has disrupted relations with their closest trading partners and sowed uncertainty and concern throughout international markets. While we remain skeptical that US import tariffs can ultimately achieve the current Administration’s goals, it has certainly been a wakeup call for US trading partners, especially Canada. We must rethink our growth strategy going forward, seeking new partnerships and, most importantly, becoming our own best customer. Security of supply chain for critical products is as important for Canada as it is for the US. At writing, Canada is about to host an investment summit showcasing $500 billion in Canadian capital projects to the world’s largest investment funds. These capital projects are wide ranging and include all of the five above. The positive multiplier effect that these projects will have on Canada’s $2 Trillion economy can be substantial.

US equities remain the largest regional weighting in our global equity portfolio at approximately 50%. We have been underweight in US equities for the last 5 years vis-à-vis the US global weighting of 70%, seeing better relative value in European and Japanese equities. We do not foresee that changing until valuations in US equities become more competitive internationally.

Our discipline continues of reviewing our client portfolios monthly, and rebalancing when call-to-action indices (“CTA’s”) dictate (see accompanying article). Year-to-date in 2026, we have continued to sell down equities as they outperform and become overweight and replace with fixed income or other lagging industrial sectors to keep portfolios in line with your CTAs. We have maintained this discipline over the four years of this current bull market. While we are in no hurry to see it end, we know what we will be doing if and when a bear market emerges… we will be selling down fixed income and buying equities on sale!

Trivest meets Erno Rubik

Erno Rubik was a professor of design in Budapest when he invented the Rubik’s Cube in 1974. It sold 100 million units by 1980 and 500 million today. He also inspired a publishing industry which has seen 50 books written to describe how to solve the puzzle. The purpose is to manipulate the 3D puzzle such that all of the six sides are each nine squares of one colour only….which is a metaphor for the investment management processes at Trivest. If you are math-inclined, an equally good metaphor here is simultaneous equations: “two or more statements that share unknown characteristics and must be solved together”.

Trivest’s Rubik Cube’s six sides begins with our six proprietary Call-To-Action (CTA) indices, which are reviewed monthly in individual portfolios. Each one is a distinct ratio drawn from different factors inside the portfolio, giving us a 360 degree viewpoint (see the Fall 2024 of Foresight for greater detail). Our six sides of the investing cube consist of:

1. AA% Rebalance CTA: An imbalance in the overall asset allocation plan strategy between fixed income and equity. If equities exceed their allocation, this likely means that the stock markets are going up...pointing towards “taking profits”...essentially practicing “selling high”... and redeploying the proceeds to fixed income. The opposite might mean there was a “market correction” (industry word for falling stock markets), which might point to selling off some fixed income to generate some cash to enable buying “stocks on sale” (eg Covid March 2020).

2. Regional Rebalance CTA: an imbalance in investing across the world’s economic zones…micro-scoping which global market is rising ...flagging the same issue as above re “taking profits” in rising markets.

3. Industrial Sector Rebalance CTA: an imbalance in investing across the ten world industrial sectors...also micro-scoping which sector(s) are rising.

The daily news talks about the market going up...the market going down. The “market” is huge ...all of Canada, all of the US, all of Europe, etc, not to mention the entire global economy. But while a whole market is going up, its constituent industrial sectors are another story. The main article in the Spring issue of Foresight sheds light on this every year. Observe the recent 2025 (2024) data from that issue:

For the year 2025 (2024)  SECTOR	Annualized Price Returns for S&P Global 1200 Index Sectors (in US dollars)	Annualized Price Returns for US S&P 500 Index Sectors (in US dollars)	Annualized Price  Returns for Cdn. Composite Index Sectors (in Canadian dollars)
WHOLE INDEX	20.8% (16.7%)	16.4% (23.3%)	28.2% (18.0)
Energy	10.0% (-1.9%)	5.0% (2.3%)	14.0% (18.2%)
Materials	24.3% (-10.2%)	8.4% (-1.8%)	98.2% (19.3%)
Industrials	23.9% (11.4%)	17.7% (15.6%)	1.9% (8.5%)
Consumer Discretionary	8.2% (20.4%)	5.3% (29.1%)	28.3% (9.5%)
Consumer Staples	6.4% (3.2%)	1.3% (12.0%)	11.2% (17.3%)
Health Care	13.0%  (-0.7%)	12.5% (0.9%)	-2.1% (5.7%)
Financials	25.7% (22.9%)	13.3% (28.4%)	30.8% (25.0%)
Information Technology	26.6% (31.8%)	23.3% (35.7%)	22.9% (37.7%)
Telecommunications	31.8% (30.8%)	32.4% (38.9%)	4.0% (-26.5%)
Utilities	22.2% (9.3%)	12.7% (19.6%)	14.9% (8.6%)

 You will note many substantial differences in most year-to-year comparisons. These are year-over-year comparisons...different to movements within the twelve months of both years…. ergo the value of monitoring sector values throughout the year, and paying attention to Sector CTAs.

 Your portfolio has target ratios for asset allocation as well as industrial and geographic allocations. The CTA statistics indicate when the actual ratios are outside of the targets. Each of these actionable CTAs has a de minimis value….we are only drawn to consider action if the ratio is greater than that value. For instance, our Sector CTA de minimis is over 3%.

4. Rifles & shotguns CTA: ETFs are baskets of companies that meet a certain directive. For instance, the ETF “ZLB” is a marker for the Canadian stock market. Accordingly it buys a basket of companies that reflect the Canadian economy and all its industrial sectors. Trivest calls this a “shotgun” security. To respond to a particular industrial sector call, eg banking, you need to be able to sell a security (ETF or direct stock) that is exclusively in that sector. This means the portfolio needs a bank “rifle”, which can be either a direct bank stock, like Royal Bank, or an ETF whose directive is just that sector (eg “XFN” or “FSF”). The Rifle CTA identifies that extent of rifle opportunities in the portfolio.   

5. Fixed income Alt-D CTA: At Trivest, we choose not to climb the yield ladder by holding corporate and other low-grade borrowers. We focus on provincial & government bonds, with the exception that we hold 8-10% of the fixed income portfolio in Alternate-D which seeks higher yields with higher risk.

6. Tax-smart investing CTA: In our Innovation Lab a few years back, we endeavoured to create a tax-smart CTA. However, the logistics were unsuccessful and there were not strong enough universal tax-smart investing principles to support the concept. However, tax-smart investing is still very much part of the Investing Rubik’s Cube. Most portfolios consist of three types of accounts: Trading (taxable currently), RRSP/RRIFs (taxable but deferred) and TFSAs (not taxable). You can find a quick summary of tax-smart investing in The Ploughman and the Astronaut (page 192/3).

So...what has this got to do with Erno Rubik’s cube…?

At Trivest, some of the Rubik’s six sides are always involved in calling for action decisions, and different ones lead at different times. For instance...

If there is a AA% Rebalance CTA from equity to fixed income, then the equity sale proceeds are called to buy fixed income. The sector and/or regional sheets will identify what to sell off, which next may call upon a rifle as candidates to sell down. If the call goes the other direction, requiring a fixed income selloff to fund an equity buy, the same process applies in reverse.   

The Tax Smart CTA may also draw in to direct which accounts should be involved in the sale and subsequent deployment of a buy. If the call is to sell equities that have made a gain, it is preferred to find a rifle security in a TFSA which makes the gain tax-free, or tax deferred in an RRSP/RRIF or taxed currently in a Trading Account.

If instead the Sector CTA is leading the call to action for sector profit-taking, then it also calls the proceeds back to a different equity sector. Thus, the cohesion of tax-smart investing aspires to prevail after the two trades. If any equity buy involves a foreign purchase, then the Regional CTA is also affected, answering to the regional targets.

After Rubik, Trivest has two more, less important CTAs. The US$ CTA informs us of the portfolio’s exposure to Canada/US exchange rate fluctuations. We have been tracking these quarterly exchange movements separately for 21 years, during which the movement was almost 50/50 up or down. The average quarter gain was 1.53% and the average loss was 1.16%. Our Spring issue of Foresight always reports five years of running foreign exchange movements with the USD, the Euro and the yen. Only the yen has a notable volatility across time. Across 21 years of foreign exchange data for Canadians investing abroad, foreign exchange contributed from 5-13% of a Canadian’s international equity return. Lastly, note also that we purchase many non-Canadian equity ETFs with foreign exchange hedging built in.

Our Janus Diagnostic CTA tracks the proportion of equity holdings in your portfolio measured against our “model” equity holdings. If equity buys are called, the Janus CTA identifies where we might fill in some holes.  

Investing Update

We have been tracking annual portfolio returns between the fixed income and equity portions and rolling three-year returns of beta portfolios since 2021. Much has happened in these six years, and both asset classes have had quite a ride! Fixed income returns started then with historical returns of 2-3%, and then experienced two years of negative returns through October 2023 (very unusual). The year from July 2024 after that saw returns of 6-9% for a year (also unusual). Subsequently to current time the returns have been “normal”.

Meanwhile, stock markets have been mostly on a tear since early 2021, except for the year from May 2022. Subsequently, it has been almost-all double digit returns ...many in the twenties and even thirties! Amidst all that was a history-setting eight months during most of 2022 when both returns were negative (has only happened three times in the past 100 years). 

Through parts of this whole period, fixed income has delivered 20-40% of portfolio total return, but currently is only contributing a minute 5% of the total return. Three year, annual compound returns tend to smooth out the markets gyrations. From January 2021 through March 2025, this statistic held in the 3/12 to 6% range, with three spikes. Since then, and approaching two years of large double-digit returns, the rolling three year return is also climbing into significant double digit returns.

Average one-year returns through to July 2026 have ranged from 11.5% to 20.97%, with most in mid-teens... and these are on balanced portfolios. More notable...three-year annual compound returns are 10-14% through 2026.

The bar graph (on the right scale) shows the equity proportion of the beta portfolios. With varying equity proportions, the rolling three year returns are not directly comparable to other individual portfolios. For most of the data points, higher (equity proportion) bars led to higher lines, as equities have outperformed bonds, as discussed above. The two line graphs (on the left scale) show the rolling annual simple returns in grey and the rolling three year annual compound returns in black.

As we wrote in the Summer edition of Foresight, we must prepare ourselves like hibernating mammals and expect and accept that some of these colossal investment returns are partly storing fat for a winter. 

Upcoming in October… we are pleased to announce that Mike has been invited, alongside a small group of advisors, to visit BlackRock’s head office in New York. There he will be meeting with the leadership teams of two of the world’s largest asset managers, RBC Global Asset Management and BlackRock, with the goal of exploring fresh thinking and new directions in wealth creation.