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Wednesday, August 8th

The S&P/TSX and S&P 500 are up a fraction this week. Like a boxer receiving multiple punches but not visiting the floor, markets have recuperated from trade-related punches all through the week. The key question among investors is, will there be a rotation within the stock market to other sectors or will a potential loss of leadership from the technology sector trigger a more broad-based correction? So far, a rotation seems to be playing out, thanks to S&P 500 EPS which are up ~24% YoY so far in Q2. Moreover, world central banks remain quiet with neither the BoE, Fed or BoJ rocking the boat this week.

Global economy – growth momentum still sliding. The momentum in global growth officially peaked in Q1/18 along with world non-financial corporate capex. Our baseline view calls for measured deceleration.

July 25th, 2018

What a time to be alive: A tough news backdrop with a very positive fundamental framework. It is hard to imagine a more difficult trading environment due to worsening trade-war rhetoric, a sharp devaluation of the Chinese currency, an unsynchronized global recovery, and the President commenting on Fed policy. This news backdrop, coupled with (1) a near-term overbought condition; (2) minor near-term deterioration under the hood; and (3) a bit of complacency in sentiment and volatility, should set the stage for corrective action. That said, we believe any weakness should be temporary and used as an opportunity to add exposure given our positive fundamental core thesis.

July 10th, 2018

The S&P/TSX is on its way to ending this shortened week on a flat note while the S&P 500 is up ~1%. Interestingly, most of the S&P 500 strength this week came from defensive sectors. The trade tariffs announced by the Trump administration come into effect today on U$34B worth of Chinese goods. But China stands ready to defend its turf. Thus, fears that trade tensions could escalate further likely explain the weakness in copper pits this week and the strength in defensive names.

Meanwhile, the PBoC pledged to keep the Yuan "stable at a reasonable and balanced level", stopping the rapid depreciation observed since mid-June. We believe EM concerns are increasingly priced-in at this point.

Regarding economic statistics this week, in Canada.........read on

June 19, 2018

Credit: Personal Credit is one beast, corporate credit is another animal. Yesterday, even though trade worries were swirling through financial markets, Bayer turned to the credit market looking to borrow $15 billion to help finance its purchase of Monsanto. Credit investors responded with $52 billion in bids......

June 4, 2018

Investors are being tossed around by headlines and are trying to make up their minds before the next big move in equities. The net result is market choppiness until some concerns dissipate. Italy has been a concern all week as risks remain on how the national debt situation will be taken care of. Will it be Brussels’ way or the populists’ way? Italian jitters have compounded the US$ appreciation. Market jitters are such that bond yields caught a bid with US 10-year Treasury yields dropping as low as 2.76% before rebounding to their 50-dma ~2.90%.

May 22, 2018

This week was a copy-paste of the week before with the rise in bond yields, oil prices and the US$ capping US stocks but supporting Canadian equities. Again, the late-cycle push in the energy and material sectors provided market leadership. As we typically see late in the business cycle when global growth is above potential, commodities (1.8%) have continued their decoupling with the US$ this week. Otherwise, US 10-year Treasury yields have jumped to 3.1%, which represents a 40% deviation from the 4-yma at 2.2%.

The two questions investors have been asking are.....

May 8th, 2018

With the S&P 500 (SPX) down the better part of 10% over the past three months, there is a clear sense of caution in the current environment. Clearly, the proper time to get nervous for a pullback would have been in late January when investors were talking about the synchronized global recovery, Fed fear was low, business and consumer confidence were bumping up against record highs, and it was nearly impossible to find a bearish newsletter writer. In the first three weeks of 2018, the S&P 500 (SPX) rallied 7.5% on these factors. That was time to be nervous.

April 24, 2018

The S&P 500 (~0.5%) and S&P/TSX (~1%) are both up this week fueled by strong earnings and commodity prices. Thomson Reuters’ blended S&P 500 earnings growth estimates reached 20% YoY in Q1/18 this week. Even when excluding energy (+69.9%), earnings growth estimates (18.3%) stand above levels reached in recent years. Thus, so far, positive EPS surprises outweigh fears related to trade tensions, geopolitics and rising bond yields. Regarding commodities, crude oil is up ~1% (more below) while copper advanced ~2%, supporting resource stocks this week. Importantly, a sector rotation seems underway considering that energy and materials are markedly outperforming the market since March lows. Undoubtedly, cracks in the tech space and in financials are helping this rotation. Otherwise, the CDN$ gave up early gains and is now down ~1% following the BoC statement where the central bank said it remains “cautious” about future rate hikes

April 10, 2018

The S&P 500 and the S&P/TSX ended the week down ~1% owing to escalating trade war fears. Indeed, China retaliated to US-imposed tariffs last week; but, the ensuing market sell off triggered some bargain hunting activities for sidelined cash to be redeployed. We also learned that the US would impose tariffs on another U$100B worth of imports coming from China; but, US exports to China summed up to U$130B in 2017. Thus, Chinese authorities will have to be creative if they want to retaliate.

March 13, 2018

Market Strategist Martin Roberge joins us for a brief Q&A on Trump and Markets.

- Trade freedom has been dominating the headlines and adding to the growing economic risks and market volatility. Trump’s tariffs on steel and aluminum imports have prompted fears of a trade war, albeit with a low probability and with some comfort offered with the exemption clauses. This does, however, remind us that negotiating with the US is difficult and that NAFTA negotiations have yet to be resolved. A more important and difficult issue is that of intellectual property rights in relation to China. For now, markets seem to be looking through the bravado because it is mutually beneficial for all sides to avoid a trade war which would negatively impact global economic growth prospects.

February 27, 2017

The Banks are the talk of the town, again. As it happens in our Canadian Market, the bank’s quarterly performance release jump to the forefront of conversation. Even with the write downs associated with US Tax breaks from our friends south of the border they are providing a rising tide as they prove profit in financial services. CIBC and RBC have already released with favour, BNS and BMO (Feb 27), TD (Feb 28).

Being released on our date of publication is also the Liberal Federal Budget, read on....

February 13, 2018

The S&P 500 is down 7.8% from its January 26 high of 2,873 and the S&P/TSX is down 6.6% from its January 4 high of 16,413. Now it would be unusual for this eight-year bull market to die without a value cycle. Growth has outperformed value through most of these eight years because up until recently, the bond market never confirmed that global reflation was filtering through the economy. Now we have it. Unfortunately, the volatility associated with higher rates is painful, but it is required to change market leadership away from the high-multiple stocks. After all, with earnings growth becoming less scarce, investors should no longer be willing to pay a premium for growth. After the recent drop, the S&P 500 Value trades around an undemanding 15x forward EPS (~21x for S&P 500 growth).

January 29, 2018

While we have seen global real estate and asset prices climb to all time highs, we have also seen a record amount of cash enter the economic system. More the $15 TRILLION USD has been injected into the global economy by the central banks over the last decade, while interest rates are at record lows. The Fed and the Bank of Japan quadrupled their balance sheets, while the People’s Bank of China and Euro Central Bank more than doubled theirs. The liquidity needs to go somewhere.

January 16th, 2018

Balance and Diversity. You’ll notice within the chart of the month that we have focused on the periodic table of markets for a sample of ten years, 1997-2016. Specifically, the period that most of us have denoted as the “credit crisis.” The focus should help indicate that long term steady returns outweigh a shoot the light out, die on the sword investment philosophy. While everyone appreciates a hot tip and some surge in their portfolio, nobody hits home runs with every swing.

January 3, 2018- Happy New Year Edition!

To Recap: A synchronized upswing in global growth, continued corporate profit recovery and still-supportive global monetary policy were cited as the key components of a fundamental narrative that drove US equities higher in 2017. There were several other dynamics in focus, particularly the low volatility that accompanied the rally and the low inflation that helped contain long-term yields despite Fed tightening.

November 27, 2017

The Argonauts have captured a record 17th Grey Cup in a classic CFL finale, and Trump hit the links for round 64 since being sworn in as Pres.

The “Turkey Rally”, as the positive seasonality pre-Thanksgiving is called, played out once again this year with both the S&P 500 and S&P/TSX closing at all-time weekly highs. Again, there were no real catalysts behind this week’s advance. Check out our charts in the letter, a lot of green.

November 13, 2017

Un-like Twitter, we will not be doubling our commentary this week. So here we go.

The S&P 500 is down fractionally while the S&P/TSX stalled this week, however still remaining above 16,000, which is still an all-time high. Once again, US politics took the upper stage with the tax reform proposal submitted by the US Senate planning to delay corporate tax cuts until 2019. Given the uncertainty surrounding the US tax plan, the power shakeup in Saudi Arabia and protectionist comments from President Trump, the market breather this week makes sense.

October 30, 2017

So, while the above happens at home, here is what’s happening abroad and what you need to be aware of: We have been banging the drum on a global perspective for the portfolio, and it only reinforces our views with news like this. Asia has set itself up with political stability contrasting the continued misgivings in the US, even with the carrot being dangled of increased deregulation (Trump has now dipped below his previous low approval rating of 38%), and Europe trying to consolidate Brexit and Spain, plus a rising wave of populism as demonstrated by Austria and the election of Sebastian Kurz. Meanwhile, as mentioned earlier, Asia has positioned itself to continue pushing......read more here. 

Monday, October 2, 2017

Global economy – synchronization achieved but for how long? We believe risky assets have been jolted this year by the positive tailwinds of global growth synchronization. However, as the last episode in 2007 reminds us, synchronicity among world economies can be short lived. What is more, 2007 marked the peak in the US equity bull market. That being said, the main difference we see between 2007 and today is the monetary policy stance among developed (DM) and emerging market (EM) central banks.

December 11, 2017

Still speaking to global portfolio mandates, and sticking with Europe, who is doing itself justice. The latest numbers show unemployment beginning to normalize even in the hardest hit regions of Greece, Portugal and Spain resulting in a solid 0.6% quarter on quarter growth for the year- The region is up to 18 months of continued growth. While there is short term noise in Brexit talks, Italian elections and the newly forming German parliament, these are hurdles that are not fundamentally damaging. The only thing that’s concerning us is Bitcoin now uses more energy per day than the entire country of Ireland…either Bitcoin is starting a fire under the polar ice caps or Ireland is truly the "Green Isles."

Monday, October 16, 2017

Following a nearly uninterrupted rally of ~5% since their August lows, both the S&P/TSX and S&P 500 took a small breather this week. Investors may be pocketing profits ahead of the Q3 earnings season, remembering that a similar pause occurred following Q2 earnings reports in July-August. It also appears that a fed rate hike for December in the US seems imminent. Read the full note by clicking.

Monday September 18th, 2017

Over the past month we have seen a lot of big moves across many sectors. The Houston Rockets sold for a measly $2.2B , Bitcoin headed for the moon and crested $4.5K on…..?, Apple saw a surge prior to the iPhone release, even though we all knew this as a planned event for months, and  although Tesla (TSLA) has seen a bit of a correction, it still surged ahead even with Mr. Musk commenting that it’s “higher than we deserve.” So where does that leave things?

Tuesday, September 5, 2017

Even with the geopolitical stimulus of North Korea firing a test rocket over Japanese territory, and with waning hopes that a tax plan is finally coming together, US equities received a boost. In Canada, higher commodity prices and better-than-feared earnings results led by RY sent a sign of relief to bank stocks, which allowed the S&P/TSX to reclaim the 15,000 mark.

Monday August 21, 2017

What happened? How will we know when to expect “the” top? With such low volatility, close proximity to record highs, and likelihood for pause in the upside, there is much discussion about “the” market peak and bubbles. Indeed, while there are nasty corrections every cycle, THE market top is identified by close proximity to recession. Read the whole newsletter HERE

Tuesday August 8, 2017

What happened? Global economy – cruising along. While momentum in global growth is leveling off, economic and industrial data received in July confirm a broadening in world economic activity. Read the whole newsletter HERE