Markets drifted lower on Tuesday with the S&P 500 down 0.3% and Toronto down 0.2%.
Aecon Group (the big construction company) was down 2.6%. Then it reported better-tan-expected earnings after the close. This has been a disappointing business. They do great and impressive projects but their profit margins are generally way too low. They have lately been blaming their problems on four “legacy” contracts. Basically it means they made big mistakes in the bidding or execution of four large contracts and now they want us to forgive that I guess. It’s like they are trying to distance themselves from – themselves. It is possible that they will get a settlement from the Coastal Gas Pipeline where they are in a big dispute. I’ll know more when I go through the results in detail probably later this month. I have a small position and am just holding. My last rating was Weak Sell / Hold. I doubt I would raise it to more than Weak Buy / Hold once I go through the numbers and the report.
News today was that Canada’s GDP was flat in Q4 and particularly weak in December. It’s very possible that we are heading into the recession that the Bank of Canada and other central banks is actually trying to trigger in order to tame inflation. That’s bad news for earnings but it could be good news in terms of hopes that interest rates will decline within a year or less. Overall it seems like a good time to have a solid allocation to cash and fixed income.