Colin Cieszynski, chief market strategist, SIA Wealth Management
FOCUS: Technical analysis
Top Picks: BMO S&P US Mid Cap Index ETF, Manulife Financial, Netflix
MARKET OUTLOOK:
The U.S. election turned out to be just a speed bump for the equity bull market. Republicans capturing the White House, Senate and House of Representatives has been well received by equity investors and cryptocurrency traders. Part of this comes from general relief that Democrat policies related to capital gains taxation were defeated, part from the notion that the Republicans may be friendlier to cryptocurrency adoption and part from anticipation that streamlining government and regulations could be beneficial for the economy and corporate earnings.
One area of concern has been the proposed introduction of new tariffs against Canada, Mexico, China and other countries. In the U.S., capital has been rotating into domestically focused companies over multinationals with mid and small cap indices doing particularly well since the election. Sectors dependent on cross border trade such as autos and semiconductors have struggled.
It’s Black Friday and the reaction to U.S. earnings season has been mixed within and between groups. Last week Walmart beat the street and rallied, but the next day Target missed and plunged 20 per cent. In recent days, clothing retailers like Gap and Abercrombie have done well, while electronics retailer Best Buy missed expectations and sold off.
Seasonally, we have moved into what has historically been the strongest time of the year for stocks. Although there have been some bumps in the road this year, corrections have generally been shallow and brief. We continue to monitor the markets for changes in capital flows.
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TOP PICKS:
BMO S&P US Mid Cap Index ETF (ZMID TSX)
This is a recent addition to our portfolios. Mid cap stocks have been attracting capital and this ETF has been climbing in our ETF relative strength rankings. Mid and small cap stocks have the potential to outperform relative to large cap multinational stocks moving forward as they stand to benefit more from decreased regulation. Domestically focused companies may also benefit from a higher U.S. dollar and tariffs.
Manulife Financial (MFC TSX)
Manulife is held in our portfolios and is the highest ranked large cap Canadian financial services company in our large cap Canadian stock universe. Canadian financials with large operations in the United States may benefit from an improving U.S. economy and may be less exposed to the direct impact of tariffs.
Netflix (NFLX NASD)
Netflix has been a long-term holding in our portfolios as it has remained near the top of our North American relative strength rankings for a long time. The shares recently broke through their previous 2021 peak and have rallied to new all-time highs.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ZMID TSX | N | N | Y |
| MFC TSX | N | N | Y |
| NFLX NASD | N | N | Y |
PAST PICKS: AUGUST 7, 2024
BMO Ultra Short-Term Bond ETF (Accumulating Units) (ZST.L TSX)
- Then: $59.37
- Now: $60.25
- Return: 1%
- Total Return: 1%
Kinross Gold (K TSX)
- Then: $11.17
- Now: $13.88
- Return: 24%
- Total return: 25%
Costco Wholesale (COST NASD)
- Then: US$810.30
- Now: US$962.95
- Return: 19%
- Total Return: 19%
Total Return Average: 15%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ZST.L TSX | N | N | N |
| K TSX | N | N | Y |
| COST NASD | N | N | Y |