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

At the start of the year, he was telling clients that the target was 5400, or roughly 15% upside. But it's a moving target now so 6000 is his next target, which is above the previous target of 5800 that was broken a couple of weeks ago.

On the TSX, he's looking at around 26,000. Back in the summer, his big call was that the TSX would outperform the S&P 500. The reason is that we're getting late cycle, and that should favour resources and the resource-heavy TSX. So far, that story has played out.

In technical analysis, the similar theory is "Dogs of the Dow". Instead, he tries to put the best patterns and charts in front of clients. People like to vote for the underdog, but TD, for example, is not a dog he'd be voting for.

Really likes energy here. Next 2 months are a bit choppy, especially with WTI crude swinging quite a bit. However, January-April is a really strong seasonal period for energy. So he doesn't mind adding across the board, and make sure to stay through the choppy period. See his Top Picks.

If he's correct as to where we are in the cycle with rotation out of Phase 2 (industrials, basic materials, and info tech), Phase 3 typically sees resources lead. More importantly, we start to see energy come into the picture. When energy comes into the picture, inflation starts to rear its ugly head again.

Gold remains in an uptrend, past his target of $2600. He's a big fan of the Commitment of Traders data from the Chicago Board of Trade, which comes out weekly on Fridays at 3:30 pm. Commercial traders continue to reduce exposure on the way up. Though gold can push higher, we're getting to the end of this move in the intermediate term.

We've had a good move, but he's cautious at current levels. Vulnerable to at least a near-term correction. Some charts look great, such as OR, AGI, and WPM, and he'd gravitate toward those.

Pipelines have been great this year and he recently took the trade off, yet they've continued to run. Continue to look strong. If he's correct about rates going higher again, and bond proxies coming under pressure, people will still want yield. If inflation comes back, he thinks pipelines are going to be the new hot thing.

Quite positive sentiment. Really on the back of inflation numbers that came in for the last month, which were lower than expected. 

Lots of value in the rate-sensitives particularly in utilities and telecoms, and even in Canadian banks. If you look at higher-growth names where valuations are quite rich, compared to the interest-rate sensitives where the valuations are quite reasonable, it's justified that they've run a little bit.

Profits are profits. But on the multiple, you're definitely not willing to pay the same for wholesale earnings as you are for retail and business. What you've seen across the board is that every single money-centre bank has beaten. They've all been showing lots of strength. Citi might have been the outlier given that it was close, but it still beat.

Absolutely, and that's the thing. Valuations are really high. You have to look at your returns going forward. If you buy high, your returns are going to be low, though you could still get reasonable earnings growth. With Q2 earnings, we saw 80% of companies beat on the bottom line. But only 60% of companies beat on the top. That divergence is quite striking. 

At some point, earnings growth will slow down. You're going to get dividends, earnings growth, and multiple expansion. Given that multiples are where they are, you're not going to get that multiple expansion. On the flipside, when everything slows, you could get multiple contraction, and that could really hit your returns.

You always need to be valuation sensitive, but you also have to look at where we're at in the interest-rate cycle. Over the next 18-24 months, more interest rate cuts are coming. Is that already baked into the market? Will there be more upward pressure on equities? You have to strike a balance.

In this sector, you can't avoid it. It affects every single player. Look at AMZN and all the data centre providers. There are only so many customers. TSM also has massive concentration risk. The whole supply chain is massively vertically integrated, so there's customer concentration risk and supply chain risk the whole way through. If you want to be in the space, you have to accept it.

Bullish. The index has a floor at 7,058 and at 6,888. Don't worry about the RSI rising, because the underlying security is still making higher highs. The S&P is not overbought, but just right, based on her charts. As long the index stays above 7,058, it will continue to trade well above its moving averages (13, 26 and 40 months). Based on the regular S&P cap-weighted index: the S&P has a floor of support at 5,669 and could well reach 5,940. Nasdaq 100 chart: support is at 19,481, then 19,277, with a ceiling of resistance at 20,690 from July. If the index breaks that, then it will shoot higher.

Company Highlight: Agnico Eagle Mines Limited (AEM)

Agnico Eagle Mines (AEM) is a major gold mining company in Canada, known for its extended history of gold exploration, development, and production. It has a diversified portfolio of mines mostly in North America with a few projects across Europe. AEM has been somewhat acquisitive over the years, with the acquisition of Kirkland Lake Gold in 2022. The name offers operational stability since most of its operations are in Canada, the US, and Finland, which are miner-friendly regions. 

AEM has been one of the most solid performers in the Canadian materials space, with a 10-year total return CAGR of 14.8%. In terms of its financials, it pays a 1.9% dividend yield, has a strong track record of sales and earnings estimates, and analyst estimates have been rising over the past year. The company is highly dependent on the price of gold, but with the underlying price of gold rising to new highs over the past several months, we feel AEM has some solid tailwinds. It is a large gold miner ($55 billion market cap) and both EBITDA and sales have grown nicely over the years (37% and 28% five-year CAGRs, respectively). 

Its valuation has compressed over the years, reaching a forward P/E multiple of 18X today. Given the expected growth in sales and earnings over the next year (29% and 78%, respectively), we like the prospects of AEM today, particularly with a rising spot price of gold.
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Market looks great as breadth broadens. It's hard to fight this strength. Looking at past soft landings: we may be getting another one because of strong job growth and stock market, but credit is tightening and if employment weakens, that will be a concern. We'll see. Also, global strife could spark an issue. You want to be in this market, but beware of a sharp reversal as in 2001 and 2008 (crashes) by balancing stocks and bonds, and consider adding managed futures to your portfolio.

Canadian Unemployment Rate Accelerates

The whole intention of raising interest rates is to stifle and slowdown the growth of the economy, in the case of an overheating economy. This is precisely what was accomplished with the Bank of Canada raising interest rates through 2022 to 2023, and as a result we are seeing the collateral damage of rising interest rates through the rise in the unemployment rate. The Canadian unemployment rate has risen from a multi-decade low of 4.9% to 6.6% as of the latest reading. This is still below highly worrying levels, but the trend is certainly worth keeping an eye on for continued deterioration in the economy. Eventually, we believe the offsetting impact from decreasing interest rates will help keep the unemployment rate subdued, but the timing of this is uncertain. 
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