A Comment -- General Comments From an Expert (A Commentary)

Geopolitical conflict certainly adds volatility and, generally, October isn't the strongest month for investing. Factor those two things in with other economic data such as US non-farm payrolls tomorrow. He wouldn't be surprised if the runup over the last year takes a bit of a pause for maybe a month. Not expecting major declines, but can anticipate market trading sideways to slightly down.

Then late October/early November, the bull market will continue its run through the next 6-8 months or so.

That's it primarily. His view is that economic data will continue to come in weaker. A number of data points have been revised downward over the past few quarters. That will continue, sees further weakness in the economy. We're in one of those funny cycles now where bad economic news somehow means good news in the stock market. Lowering inflation expectations and interest rates will propel markets forward. He is starting to worry about late 2025 and into 2026. 

But for the next 10 months or so, you might want to be invested a little more aggressively, to take advantage of what should be a continuation of market strength.

For the last 6 months, he's leaned into the AI, tech-driven themes. That said, there's always going to be movement between growth and value. At different times, value and interest-rate sensitives will have their day in the sun.

His overall view is that growth-focused securities will primarily drive the market going forward. Any short-term pullback on core names such as NVDA or mega-cap tech is a buying opportunity. Doesn't mean you can't have other things in your portfolio, as diversification is always an important factor. 

But if he was choosing one sector to ride for the next 6 months or so, it would definitely be the more tech-focused sector.

He's neutral. A bit of jockeying for place lately. Some of the stronger performers like RY and NA have cooled down a little. Some of the laggards such as BNS and BMO are seeing their day in the sun. As you collect your dividends, should see 8-9% total return.

As a DIY investor, it's really hard to get access to the best-quality bonds. The fund managers get the pick of the litter before whatever's left gets to the retail channel. Generally if you buy them on the secondary market, you're buying at a premium.

He'd be comfortable owning bond funds through ETF structures such as XCB or XLB on the TSX. There are a lot of bond mutual funds but he doesn't see a lot of value there, especially with a big fee overlay.

Market's actually in a pretty good spot. We're in the 2 toughest weeks of the year, but you always have to look at the state the market comes in on. We have close to 70% of stocks ahead of the S&P on the year, so a nice broad-based market. Equal-weight index is outperforming the market-cap-weighted index, which tells you that the average stock is beating the S&P.

Lots of sectors are working. The time to worry is when breadth is narrow, with only a small number of companies contributing, and if they were to break then you could get hurt. Great opportunity right now for investors to be diversified in the US, Canada, and globally.

So no, not too much euphoria. Lots of people are worried, which is good. In general, signs are pretty good for the fourth quarter.

80% of companies in the S&P 500 are trading above their 200-day MAs. That's as good as it's been all year long. If you look at the conditions underneath the market surface, there are some big stocks that are struggling. But the market in general is acting really well.

Yes. Last year, he converted one of his funds to a pure global mandate, but ex-US (so, nothing to do with the US). The fund is up ~21% on the year. His view is that we'll have several years of global outperformance. 

The one market that was weak was China, and they really brought the bazooka out 2 weeks ago; the economy still has some work to do, but the market's probably put in its lows.

He prefers the infrastructure builders to the owners. Engineering companies, and those involved in construction. Lots of $$ being spent building infrastructure, and a bit more leverage in the earnings. An example is WSP, which he holds.

Long-term moving averages are really important. A 200-day MA, or even a 150-day, is a great indicator of a long-term trend. Look to see if it's trading above it. But, more importantly, is the MA pointed higher or lower? 

Often when a stock comes off the bottom it might rally up and through the 200-day MA. But if that MA is headed lower, more often than not it's going to end up pulling back and bouncing along that 200-day MA until it gets swung higher.

All of his positions are above the 200-day. Usually if a stock goes below the 200-day MA, he wants to be gone. He wants to know the position of the 200-day as it's rising. Then he watches to see how far things get stretched above the 200-day, because often if it goes way high it can get pulled back in.

If you look at one of the big indices, you can tell whether it's in a structural, long-term bull market if it's trading above the 200-week MA.

Investment Theme to Consider: Urbanization and Digital Infrastructure

People continue to leave their rural lives behind and flock to cities in nearly every country on the planet. This means better jobs, more excitement and more service for them. Thus, this trend is likely going to continue for decades.

Investment opportunities abound from this shift. Companies can establish the necessary infrastructure to cater to both people’s move to cities and their rapidly growing and changing digital needs. As the citizens of developing countries become wealthier, they are going to want to buy cars, smartphones, digital TVs and everything else that can make their lives better and easier.

New technologies are bound to emerge and the companies that can capture market share of this new trend could do very well.
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September was surprisingly good, typically the worst month. But Jay Powell's 50-point interest rate cut and China's stimulus pleased the bulls. But he's a little suspicious of October. The Canadian market had a good Q3 and non-tech enjoyed a broadening in the rally. Geopolitics are unknown, but interest rates are heading alot lower as economic data will soften. Earnings expectations are elevated. Be cautious with cyclicals. Thre's still a trade in bonds. Sentiment and valuations are extended. Stay close to the exits.

Capping off a pretty good quarter, which caps off a pretty good year so far. As we're entering the back half of 2024, we're talking about China reflation, inflation coming down, and Fed rate cuts. Generally speaking a constructive market as a whole, and for equities as well.

Tremendously so, and across a lot of yield-oriented sectors. More importantly, it's been global as well. Other global markets have been catching up to the US. Mean reversion in all the positive ways.

20+% in one week. The single biggest positioning squeeze we've seen in many years. And it all started with what are still, largely, not deeply tangible stimulus measures. But everyone believes now that the promise is real, because the rollover in the economic data was happening across services and goods PMIs. The government is reacting to the softness in China with stimulus measures that everyone believes will have a future impact, even if they don't work currently.

That's why the positioning rally has been so extreme, 23% on the week he believes. He partially believes this will work. See his Top Picks.