Keeping You Informed: Sentry Update

James Dutkiewicz, Chief Investment Officer
Aubrey Hearn, Head of Equities, Vice-President and Senior Portfolio Manager
Bryan Brown, Portfolio Manager

Market overview and outlook

The current crisis in the markets is different from the tech bubble of 2000, the global financial crisis of 2008–09 or even the Great Depression of the 1930s. This is because, “you can’t fix the virus with capital” (e.g., the recapitalization of financial markets by governments in 2009).

Have we touched the bottom? That is unclear, but we do expect the markets to rebound. There’s a “strong likelihood” that the next 5-7 years will look pretty much like the past 5-7 years. Why? Quantitative-easing measures by central banks, continued low interest rates and “decent” but not hot returns from equities.

Some countries are already reopening their economies, and although there may be fits and starts over the next several quarters, we expect a gradual return to normalcy to be complete by 2022/2023. We are looking at the value of companies over a projected business cycle, not just over the next few months.

Why we still like the U.S. market

  • From the peak of the first quarter of 2020 (February 19) to the trough (March 23), the S&P 500 Index declined 27%. However, from the trough to April 13, 2020, the S&P 500 Index went up 16.8%, which is better than the MSCI EAFE Index’s 12.6% increase.
  • Over a 30-year period (April 1, 1990 to March 31, 2020), U.S. stocks (as measured by the S&P 500 Index) led with an annualized return of 10%, versus just 6.7% for the MSCI Europe Index and 5.1% for the MSCI EAFE Index.
  • While the U.S. government has taken on a “startling” amount of debt to fund income assistance programs as a result of the pandemic shutdown, both U.S. consumers and businesses had less debt and stronger balance sheets going into this crisis than they had in 2008-09.
  • The “safe haven” provided by U.S. Treasuries has been positive for the U.S. market.

Sentry U.S. Growth and Income Fund and Sentry U.S. Monthly Income Fund

  • Even before the market decline, we had been gradually “de-risking” Sentry U.S. Monthly Income Fund by having a higher level of fixed-income assets (from 33% at December 31, 2019 to 39% at March 31, 2020). This flexibility in the mandate helped to mitigate the Fund’s losses during the first quarter of 2020.
  • We are investing in companies with “structural tailwinds.” This includes adding to positions in Inc. and Microsoft Corp., both of which are seeing an uptick in recurring business that we expect to continue beyond the pandemic-related shutdown. We have also added to positions in companies that are well-positioned to take market share over the longer term, including Live Nation Entertainment Inc. and McDonalds Inc.
  • We trimmed or sold positions in Schlumberger N.V. and Cinemark Holdings, Inc. where the outlook is not as favourable.

The Canadian landscape

  • Clearly, the government is prepared to do even more than what is required to prop up businesses and consumers through the COVID-19 crisis.
  • Government’s fiscal policy response is well-designed and adequate in size, with $260 billion in total fiscal stimulus (11% of gross domestic product).

Sentry Canadian Income Fund and Sentry All Cap Income Fund

  • We are investing in companies that “will not only survive, but thrive” in the current macro environment, some of which we viewed as expensive in the past.
  • We have added to and/or acquired shares in defensive and attractively priced companies including Canadian Pacific Railway Ltd., Keyera Corp., Brookfield Business Partners L.P. and Intact Financial Corp.
  • We have trimmed or sold positions in more economically sensitive companies including Gildan Activewear Inc. and CCL Industries Inc.

Key takeaways:

  1. The U.S. is in a better position than other developed economies/markets in Europe. We will maintain a permanent exposure to the U.S. market.
  2. We will continue to adjust the funds’ risk exposures by changing asset allocations.
  3. There will be an “unsynchronized recovery” to the market crash, so volatility will remain a feature of markets for at least the near term.
  4. Will be very selective with exposure to the energy sector. Companies in the information technology sector companies should continue to lead the recovery.


Derivative: A derivative is a financial security with a value that is reliant upon, or derived from, an underlying asset or group of assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its price is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Derivatives can be used to achieve many different outcomes like hedging against downside risk, earning additional income within a portfolio, or expressing a bullish view without the need for a sizable capital outlay.

Duration: A measure of the sensitivity of the price of a fixed income investment to a change in interest rates. Duration is expressed as number of years. The price of a bond with a longer duration would be expected to rise (fall) more than the price of a bond with lower duration when interest rates fall (rise).

Liquidity: The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset’s price. Cash is considered to be the most liquid asset, while things like fine art or rare books would be relatively illiquid.


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Published April 27, 2020.