On the Money with Dynamic Funds

PARTICIPANTS

Tom Dicker
Vice President and Senior Portfolio Manager

Ryan Nicholl
Vice President and Portfolio Manager

Mark Brisley: You're listening to On the Money with Dynamic Funds, from market insights and analysis to personal finance, investing, and beyond. On the Money covers it all, because when it comes to your money, we're on it.

Tom Dicker: Welcome to another edition of On the Money. I'm your host, Tom Dicker, Vice President and Senior Portfolio Manager at Dynamic Funds. Today we're going to be discussing global equity income investing with my partner and co-manager Ryan Nicholl, Vice President and Portfolio Manager at Dynamic Funds. Ryan, let's get right into it. After a major market pullback in 2022, and a tech rally that has extended into 2024, what is your current view on the investability of global stock markets?

Ryan Nicholl: Thanks for having me, Tom. I'd say it's been four straight years of unusual markets from my perspective. 2020, we had obviously COVID and a major bear market that was met with an equally violent rally back up. 2021 was really the work-from-home growth beneficiaries that drove the markets significantly higher. 2022, we saw interest rates and inflation pick up and a bear market. 2023, we saw the tech rally, part two, if you want to call it that, as we rallied back. That's where we are now. When you step back and look at the markets in aggregate, at a top-line basis, it looks like a risky environment.

The S&P, for example, we're recording this on March 11th, so with the caveat that things can change quickly. The S&P currently trades at about 21 times forward earnings. That's quite elevated in terms of history if you look back the last 10 years. It's like the second highest level just after the late 2021 period. From that perspective, the market looks expensive, but I would say under the hood in terms of our ability to create portfolios, it's really not that bad. A lot of the really expensive part of the market, what's making the market look expensive is the concentrated mega-cap tech names at the top. The Magnificent Seven, if you want to call them that.

Those stocks are very large and they're very expensive. When you strip those out, if you look at more equal-weighted indices, if you look just stock by stock, sector by sector, the market is averagely valued in terms of price earnings, multiples, or free cash flow yields, or however you want to look at it. It's really not that bad of an environment for us to pick stocks. I would say it's not a great environment if you're just going out to buy an index because in aggregate, it certainly looks expensive. In terms of the types of names that we invest in, the names we're looking for, the opportunity set is relatively normal, relatively good. We have fairly good upside across our portfolio.

The fundamentals out there are actually relatively solid. I know there's been a lot of talk over the past few years with elevated interest rates and inflation concerns of recession. We're really not seeing any of that. Inflation is stabilized. Interest rates have stabilized. Earnings are pretty solid. As I said, we can still find relatively good businesses at reasonable prices. It's one of those things where the index makes me nervous. I could see how we could have a pullback after such a strong rally. The opportunity set for our types of businesses is still pretty good.

Over a medium-term timeframe, I think the prospective returns for our investment style is still pretty good. Cautiously optimistic, although clear areas of overvaluation that you have to work around and avoid to achieve those attractive returns.

Tom:

On the topic of overvalued areas, what would it take for this period of the Magnificent Seven's dominance of the U.S. market to end?

Ryan: I'm not going to pretend like I know exactly what caused it. I would say the most likely answer is generally the answer to all kinds of questions in investing, which is fundamentals. A lot of what has driven the Mag Seven strength has been justified, if I'm being honest, in terms of their underlying fundamentals. They were hit fairly hard in 2022, and they have rebounded quite nicely. You've seen positive earnings revisions, and a lot of that recently has been driven by AI-related excitement. There's obviously a pretty strong capex cycle around artificial intelligence investing, and that has driven positive earnings revisions in the tech names.

I would say whether that Mag Seven dominance continues over the next 12 to 24 months will really come down to fundamentals. The fundamentals relative to the other opportunity sets, so other stocks that you can invest in, and the fundamentals of whether the AI boom actually lives up to the embedded expectations we have right now. If you just step back and strip out AI, I would say it seems likely that the growth rate of those businesses is likely to slow over the next 12 months. Meanwhile, a lot of the peers that are investable are likely to catch up. You're likely to see a bit of a convergence in earnings growth between the Mag Seven names and the non-Mag Seven names.

From that perspective, you'd expect some normalization and performance. AI is the trickier question, and that will just come down to whether the huge amount of capital being spent right now actually sees a return in terms of the monetization. These tech businesses operate like any other business. They're looking for a good return on invested capital on any money they spend, so they'll need to see the monetization of the AI investments come through over the next 12 to 24 months. If not, you're likely to see a pullback in the spending there and a little bit of the wind come out of the sails in that premium multiple that they're getting.

I would say short-term, anything can happen, but over the medium-term, it'll be the fundamentals of how the relative growth looks at the market and how the AI run-up recently plays out.

Tom: Why don't we talk a little bit about what's going on in the European and Asian markets? Are you seeing the same concentration issues in Europe and Asia?

Ryan: I'm actually not, although I'm seeing a lot of people on the sell side try to make the comparison. We've heard a lot of new acronyms like GRANOLAS and things like that to try to pick out the European Magnificent Seven or Magnificent Ten, and it's really just not true when you look under the hood. There's certainly pockets of the European market that have the same characteristics of spectacular returns and potential overvaluation. You can think of things like Novo Nordisk and obesity or something like semiconductor stocks.

When you step back and look at, call it EV markets, so Europe and Far East combined, they're not that concentrated in the same way that the U.S. markets are. They're not as dominated at the top end by a few very large companies. In the top 10 of European markets, you see things like Nestlé , AstraZeneca, and Novartis, and very high-quality defensive businesses that are nowhere near overvaluation. When you step back and look at the aggregate mix of the EV market, it actually now looks better than the U.S. in my opinion. The U.S. on its own is the most high-quality and diversified stock market in the world. There's no question about that.

When you aggregate up the European and Asian ones, the business mix looks better to me when I look at it. For example, the largest sector in EAFE is financials, and then it's followed by industrials and health care, and discretionary before you even get to technology. It's a very strongly diversified aggregate mix of businesses. They're fairly defensive in aggregate, they have good global exposures. While there's elements of pockets of overvaluation and run-up, the mix is still more diversified. There's not the same concentration at the top. It's really just not quite the same as what we're seeing in the U.S.

Tom: Sorry, Ryan, you said GRANOLAS. What's that?

Ryan: Yes. That's a term that's been made to try to replicate the Mag 7. It just doesn't really fit when you actually step back and look at it. You have a lot of names and there would be like health care names like AstraZeneca and Novartis. You have things that are staples like Nestlé, L'Oreal, consumer luxury businesses like LVMH. There's pockets of overvaluation within that mix of businesses, but for the most part, it's a more diversified set of businesses that aren't really correlated in the same way that tech and AI are. It's just really not a comparable measure of concentration risk that you would have there.

Tom: On the topic of Europe, how is the European economy adjusting to the new realities of higher rates, a slowdown in China, and the ongoing war in Ukraine?

Ryan: It's like it's muddling through just as they have been for the past decade or so. Coming out of the Great Recession 2008-2009, Europe was slower growth and a lot of that was driven by slower population growth or almost no population growth. Lower productivity growth, some structural issues in energy supply, and banking structure. That's all the same now. It wasn't in the past. They are certainly feeling more of the pressure, the ongoing war in Ukraine obviously puts a lot of pressure on their supply chains.

The slowdown in China, their economy is much more integrated with China than North America's is. Those are all incremental effects. I would say in aggregate, Europe's actually maybe not doing quite as bad as people might have expected. I think people were starting to forecast a recession in the U.S. and a disaster in Europe. What's really happened is the U.S. has come nowhere close to a recession and Europe's muddling through, and in very modest growth. There's divergences there, like Germany is obviously much weaker. They put themselves into a much weaker position given that they've shut down all their nuclear reactors. Their energy supply security is just not the same.

They're maybe more likely in a recession. UK has also been weak. Across the continent, it's not that bad in aggregate. Our funds are overweight in Europe and have been for some time. That's not the same as us being overweight in the European economy. We don't have a particularly positive view on the European economy itself. What we do find is a lot of businesses in Europe are very global in nature. They've expanded internationally much quicker than their U.S. counterparts. A lot of times, when we're comparing businesses across sectors, across geographies, we find businesses in Europe that are equal quality or even better quality than their U.S. counterparts that tend to trade at cheaper multiples.

A lot of that is the European market is just far cheaper than the U.S. market. They tend to get dragged down. Anytime we can find businesses that are higher quality or equal quality for better value, we're always going to skew in that direction. We've built up our overweight in Europe, not on any basis of the European economy being particularly strong, but just on the idea that we can find really good global businesses there with strong growth profiles that are just cheaper than the U.S. counterparts.

Tom: When I think about some of those European companies you're talking about, they would skew very heavily to consumer staples and health care. They do make up some of your largest sector overweights. Maybe we could talk a little bit about one of them, what drives your conviction in consumer staples right now?

Ryan: Consumer staples is an interesting one for me, a personal one for me because before I joined here almost eight years ago, I was a consumer analyst. I covered consumer staples and consumer discretionary for a large Canadian pension plan. Back then, call it 10 years ago, consumer staples were really highly regarded. We came out of the '08, '09 crash. There was limited growth around the world and the staples had come through the '09 crash with flying colors. They had strong emerging market growth, population growth per capita consumption growth. They were just viewed as more predictable and better growth than a lot of their peers. They traded at a premium multiple to the market.

That has slowly eroded over the past, call it 8 to 10 years. Part of it is just the relative opportunities that technology has been booming, so the relative shine of staples has come off. Part of it is the slowdown in emerging markets. The mid to high single-digit growth rates that we're getting has become more mid-single or low to mid-single-digit top-line growth rates. You've seen staples de-rate to a level where they're no longer at a premium, and in many cases are at a discount to the market. Nothing is really fundamentally broken in consumer staples. There's still relatively high-quality businesses. They have wide economic moats. That's driven by two main factors. It's by their brands.

The main example I'd say is Coke is that their brand is strong. We know what they're doing today. We know what they're going to be doing 10 years from now. 10 years from now, they'll be able to build a factory with a good return on invested capital. They're very predictable and they have massive cost advantages. That is a business that can garner a strong valuation in the market. They're no longer garnering those strong valuations in the market. We're particularly seeing this in Europe. In the European beverages, this would be in the beer and spirits names, like an AB InBev, a Heineken, a Diageo. They're trading at very long-term relative, called PE multiples or free cashflow yield, relative lows versus the market.

We also recently added a position in Nestlé, which is in my opinion, the highest quality food business in the world. It's derated on a very simple theme of they were getting good pricing as commodity inflation was going through. That pricing is now coming off and you haven't yet seen volume re-accelerate. People are pricing in slower growth. Fundamentally, we know what these businesses are. We can model their population growth. We can model their likely pricing power and mix they're likely to generate. We can model their margin structure. It's pretty clear for us to see when they reach an undervalued state.

Now there is a number of particularly European consumer staples that look significantly undervalued to me, which is unusual. We're even starting to see it a little bit in the US. I think in the call it 13 or 14 years, I've covered consumer staples. I've never bought one. We're getting to the point now where they're even those ones are just getting too cheap. They're not the highest quality businesses in terms of their growth profile, but they are very stable and predictable. In a way, it reminds me a bit of utilities where at a certain point, a predictable business just gets too cheap.

That's where we've reached in consumer staples in my perspective. Running a defensive dividend fund, when you have defensive businesses that are quality and look too cheap, we tend to find those attractive. That's an area we've been adding to.

Tom: What about health care? That's another area you've been overweight for a long time and continue to be overweight right now. Why do you still like health care?

Ryan: Health care I've always said, I think ticks the boxes of what we're aiming for in these funds the best. I run the global funds of the Equity Income team. The Equity Income team's approach is quality at a reasonable price and downside protection. Health care is very high quality. Large part of that is driven by patents, which when you really think about patents, they're government-mandated monopolies, which obviously gives you incredible economics. They have switching costs. They have cost advantages. They're very wide-moat, sticky businesses, but they also have basically secular growth that is extremely predictable for the next couple of decades.

Aging demographics is one of the most obvious themes out there in the market. This is happening in Canada and the US. It's happening in Europe. It's starting to happen all throughout emerging markets, in Asia. Populations getting older and it's a simple fact that they spend more money on health care than younger generations. It's basically structural at this point, absent just massive cost reforms that health care spending is likely to grow faster than just broader consumer spending and GDP growth. You line up a high-quality industry that's structurally growing faster than GDP and is very defensive. It's a sad truth of life that people don't stop getting sick in recessions. It's a defensive business model.

They have good dividend yields. The valuations are still quite reasonable. There have been some slight changes in how we approach the sector. We've historically invested through four main pockets of health care, that being pharmaceuticals, medical devices, life sciences, health insurance. We have pulled back a bit on the pharma side. That's mostly just going through the companies one by one and we're struggling a bit more than usual to find the right combination of underappreciated pipeline and the risks that they're facing from patent expiries.

You layer on top of that a little bit of elevated risk around drug pricing regulation. We have pulled back on our pharmaceutical exposures, but we still maintain very large positions in medical devices, life sciences, and health insurance. In aggregate, we still have a strong health care position. I would expect us to continue to do so as long as valuations remain relatively attractive.

Tom: One bright spot within the pharma space has been the obesity theme. Can you talk a little bit about whether or not you're directly invested there? How do you think about that opportunity or risk?

Ryan: Obesity is one theme that I'm perfectly happy to just avoid exposure at the moment. That really comes down to just a question of math in my book. Myself and David Cho, our health care analyst, and a number of other investment professionals here have gone through what is likely the total addressable market. What's likely the uptake, what's the insurance coverage, what's the likely competitive profile, what's the likely pricing power? We don't think the current valuations of companies like Eli Lilly and Novo Nordisk are reasonable based on how big the market is likely to be. Yes, the market is likely to be very large. These might be the largest drugs in history.

When you have pharmaceutical companies trading at something 45 times earnings, that's not the same as a regular company trading at 45 times earnings because a pharmaceutical company has patent expiries. Not only does something like Eli Lilly have to see their earnings go up three to four times in order to just get a standard 12 to 14 times PE multiple like their peer set. They then eight years from now have to deal with the largest patent cliff in history and the ability to replace that. They'll do their best to extend the life and find other drug areas to fill in the gaps, but it's unlikely they'll be able to achieve any level of sustainable earnings post-patent expiry on these drugs.

Not only do they need to have massive growth that we think is probably not that achievable, they then have to find a way to plug the gap in the other side. They're going to be battling a multiple derating from 45 times earnings all the way down, and we've seen single-digit earnings multiples in these types of businesses before when they face giant patent cliffs. For us, the math on that is hard for us to reach. We're not willing to take risks in that space right now.

Tom: What other sectors do you use to build up the defensive stew in the global funds and where are you seeing defensive opportunities right now?

Ryan: Yes. For those who don't know, we are not benchmark following anyway. We're, obviously, cognizant in what's in the benchmark. We just see no reason why we have to just match the cyclicality levels of what exists in the market. What we tend to do in building our defensive funds, these funds are meant to go down less in the market when there's a pullback, is we tend to overweight defensive sectors, but not even just that, we tend to overweight defensive companies within cyclical sectors. Part of the defensive stew is where we're at health care, where we're at staples, I've gone through the rationales there.

We tend to look for investments in other defensive areas like utilities, real estate, infrastructure, telecom, when we find them attractive. I'd say across those, for the most part, they're pretty attractive right now. Utilities, I would highlight in a way it reminds me of U.S. food and that it's not really exciting. We know what these businesses are. The fundamentals of the utilities are better because just of aging infrastructure, the likely capital investment is fairly certain. They generate a very consistent return on that investment. The quality of those businesses are better, but they're pretty cheap too.

We can buy pretty high-quality U.S. or European utilities for something like 13 times earnings, 14 times earnings with 5% dividend yields. These are businesses that are likely compound high single-digit earnings growth. Those are pretty obvious investments for us in our defensive dividend style. The businesses that can compound high single-digit earnings and will likely benefit a bit from positive multiple re-rating will benefit from the dividend yield. This is a low-risk, reasonable return type investment that we like. We have some exposure through real estate. You can obviously talk to that much better than I can, given you run the real estate frontier for many years.

We have some exposure to infrastructure stocks; we like the transportation infrastructure theme in terms of we have exposure to highways and airports. We don't actually have any telecom exposure. That's the one defensive area that we do tend to avoid and that's mostly on quality grounds. They're high capex industries that are competitively very intensive. I think a lot of Canadian investors don't necessarily see that because we have a pretty good structure in Canada. That structure is not replicated across the world in the US, Europe, and Asia, the industries tend to be a lot more competitive.

We tend to avoid telecom on quality grounds, but certainly, staples and health care, in addition to utilities, real estate, and infrastructure is the core of our defensive bucket of investments.

Tom: I just want to talk a little bit about valuation and how you approach investing in technology through an equity income or quality at a reasonable price lens where you're focused on downside protection. A lot of what's hot is in the AI space. How do you invest in or approach the AI theme in your global portfolio in light of your style?

Ryan: The way we invest in technology, and maybe I'll start with the AI part. Even looking at the AI, we look at it the same way we look at the obesity theme, which I talked about earlier, and that's through a fundamental lens. That's wherein lies the difficulty with analyzing the AI theme, in that the range of outcomes is still absolutely enormous. No one, certainly not me, and I would argue no one knows exactly what artificial intelligence is going to be. We know that they're currently spending an enormous amount of money on it.

What we try to do in relation to the artificial intelligence team is just get exposure into areas where there are concurrently strong fundamental franchises that we think are reasonably valued, but those franchises that also have AI-linked upside. This would be in names like Microsoft, SAP, Amazon, Google. We have exposure through the cloud providers. We have exposure through the application software providers. These are high-quality franchises that we think can stand alone on their current valuation and be reasonably priced, where the AI exposure acts as a call option.

Where we're not willing to invest in the AI theme is in more of the direct infrastructure providers, so the semiconductor providers. This is largely just on the grounds of we don't know how durable the theme is. There's likely somewhere around high, double-digit, or even like $100 billion of capex being spent on this this year, which are just enormous numbers. At a certain point in time, those companies are going to need to see that return on invested capital. That really means what we're going to need to see is whether the use cases of artificial intelligence match the current capex investment that's being made.

We just don't know yet whether we're going to reach it. We see a lot of use cases starting to pop up, things like GitHub, things like customer service and call centers, and things like that. There's still a fair way to go to justify the level of investment currently. We're treating the AI theme with a level of being cautious and trying to link it to other core franchises where we have confidence in the fundamental value. How that looks in terms of our agri-technology exposure, we apply our same quality at a reasonable price theme. We have an overweight to software across our funds, and that is driven by a number of very high-quality businesses like Microsoft, SAP, in the IT services areas like Accenture.

Those are businesses we can wrap our heads around their quality and their valuation. We don't have any exposure in the hardware names, so there's no exposure to Apple or like companies. That is more so driven by our valuation. We're intrinsic value-focused investors. We only ever buy businesses that we think are undervalued. When I run the math on Apple's likely growth, I just can't justify the current price that it costs to buy the shares. We follow our value discipline there and have no exposure. On the semiconductor side, again, I said we don't have any exposure to the AI semis there, just given the range of outcomes and the volatility. We do have some exposure to analog semiconductors.

That's actually a recent position we added, and that was based on some good internal work and just analyzing they've had a major inventory correction where the likely level of sustainable earnings is, and relative to the current valuation. We just found an attractive current valuation opportunity. In aggregate, that does lead us to a technology underweight, but it really is, as it's an overweight in software offset by an underweight in hardware names like Apple and underweight in semiconductors.

Tom: Another area I noticed you're pretty active or have a big active weight would be financials, which, for a defensive fund might come as a bit of a surprise to people. How can you explain the rationale for being so heavily weighted to financials?

Ryan: Yes, that's the one that even I look at sometimes and be like, "Do we really want to be overweight financials running a defensive fund?" It really comes down to, these funds being built stock-by-stock from the bottom up and all the businesses we own in financials I look at. They just make sense to me in terms of their quality, value, and defensiveness. I would say the most typical exposures we have within our financials are the U.S. banks, but the position sizes aren't that large. They are actually ones that we've started to trim lately. That was largely a call of, we think the franchises are underappreciated. They were very cheap when we bought them in the single digits of PE.

They've re-rated higher. I still think they're relatively cheap versus just call it the aggregate index, but they're getting a little bit pricier. We have to admit they are among our riskier positions. We're starting to trim those back as they have rallied. The majority of our overweight is actually not coming from banks. When you add all the single areas of financials, so banks and capital markets and insurance, we're significantly underweight those areas in aggregate. Our main overweights in financials are actually in payments and exchanges. Payments, not surprisingly, we find the card providers MasterCard and Visa to be high-quality franchises.

Where in addition to just global consumer spending growth, they also benefit from the cash-to-card conversion. These are franchises that are very wide moat that have strong high single-digit top-line and are still reasonably valued. Those are core long-term holdings that are large positions in our funds. We also have two exchange positions that we find attractive. These are very predictable counter-cyclical businesses that trade at reasonable valuations. Yes, optically at a high level, an overweight financial seems counterintuitive for a defensive dividend fund. When we really look at them company by company, we like what we see in terms of the quality and valuation in those businesses.

Tom: You've tended to be overweight consumer, discretionary, and industrials, or at least you've had pretty big investments in them. You're currently underweight those. What's driving that more cautious positioning?

Ryan: Discretionary, industrials are two actually very good sectors. They're generally fairly high quality. There's a huge amount of diversity. When there's a huge amount of diversity in the types of businesses and sectors and exposures they have, we tend to find a lot of good ideas just because there's a lot of options to pick from. It's been just an interesting period of the last 6, 12 months where it's just been harder and harder to find ideas in those sectors. It's largely because the recession narrative has faded over the past 6 months. In 2023, people thought a recession was coming, and then it just didn't happen.

These are the more cyclical but high-quality areas in the market, and they have seen a bit of rally there. They've also had some linkages to just strong consumer spending, to AI-related capex themes that have driven industrials higher. They've just gotten a bit expensive. We're struggling from a bottom-up perspective to find undervalued ideas there. We do still have exposures in discretionary. We have restaurant exposures. We have athletic goods exposures. In industrials, we have capital goods exposures, but it has gotten harder. As I look across our portfolio, we model every company we own. We dig into the fundamentals. I can see the upside of every position.

The industrials and discretionary names tend to have less than what we're finding in other defensive areas like stables and health care. They're less than what we see in other cyclical areas that are cheaper like financials, like energy. It's mostly just a valuation call on those businesses that have maybe gotten a little bit relatively expensive and look like a bit more overvalued area of the market to me.

Tom: We didn't talk about Asia. Japan's done pretty well. Do you own anything in Japan or in Asia right now?

Ryan: We do. Japan is a really interesting market for a global investor. It's been obviously a very long-term challenging market. Call it even 30 years. Part of that has been driven by structural problems. Demographics, to be honest, are quite terrible. They're in declining population state. There's been no inflation. Interest rates have been zero. On top of that, there's been, I'd say, shareholder interest concerns in that the return on equity has been quite terrible. They don't really lay off employees. They don't try to have cost-rationalizing programs. They don't try to drive up profits if it's going to cost them employees. It's like a fully employed mindset that hasn't been that beneficial for shareholders.

That is changing. The return on equity in Japan is improving, and that's a dramatic shift with positive repercussions. We are constantly looking for ideas in Japan. We do have two exposures. We own Sony in discretionary. We own 7-Eleven in staples. Those are just good global franchises that we think are reasonably valued. The other areas of Japan we're always looking for ideas would be financials, industrials, and technology. Those are the three big ones in Japan. We tend to avoid Japanese financials because of all those structural issues I laid out in terms of demographics, lower interest rates, and low inflation.

The return profile of those businesses are not good, and we think they're riskier than maybe the market does. On the industrial side, we have historically owned industrials in Japan. We're constantly looking for ideas, but a large number of them are auto related, and we don't have an overwhelmingly positive view of the quality of the auto sector, so we tend to ignore that area. We're certainly looking on the capital goods side in Japan. Then technology is another area we're always looking for ideas in Japan, but we have struggled a little bit to marry up quality and valuation.

Japan has big divergences where a lot of the lower-quality stocks are really cheap, so it's probably a pretty good hunting ground for just a pure-value investor. A lot of the high-quality businesses are recognized as such and are quite expensive. Japan is an area we're constantly looking for ideas, but it's historically been fairly difficult to line up the right combination of quality and valuation that we're looking for.

Tom: We did a pretty good look around the world. We talked about the U.S., Europe, Asia, and went through a few sectors. I think that was a really good overview of your thoughts on the market right now, Ryan. Do you have any final thoughts?

Ryan: Yes, I would just highlight, I look at the market and at a high-level index level, it looks expensive to me. It looks risky. There's concerns around inflation being too high. There's still concerns that higher interest rates will eventually drive a recession. It doesn't feel that scary to me when you look at the underlying fundamentals of the businesses. Earnings are quite solid. If you just take a valuation mindset and avoid the obvious pockets of overvaluation. You can still build a high-quality defensive portfolio trading on reasonable valuation multiples with good growth profiles, good dividend yields.

I think that's what we've got on certainly the global funds that I manage, the U.S. funds that you manage, the Canadian balanced funds that are managed across the team. The opportunity set for our style, feels pretty good to me now, although the index scares me. When I look at our funds, I think the opportunity set is maybe perhaps a bit better than maybe even our clients think they are. I'm optimistic on a midterm basis of what these funds can achieve.

Tom: Thank you so much for that, Ryan. I think that was a wonderful overview and thank you so much to our listeners. I wish everybody happiness and health and good luck in the markets.

Mark: You've been listening to another edition of On the Money with Dynamic Funds. For more information on Dynamic and our complete lineup of actively managed funds, contact your financial advisor or visit our website at dynamic.ca. Thanks for joining us.

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