Politics Drive/Global Picture+/Deregulation Helps
Volatility continues this week in equity markets – seems to be all politically driven – as earnings season was a hit and 75% of companies beating revenue estimates.
Positives: Ned Davis S&P 500 Sector Roadmap expects equities to trend down until after summer – then strong rally for year-end – been right before on forecasts. Spent time at Dynamic Fund’s Investment Conference and Oscar Belaiche highlighted his positive views including deleveraging happening as rates rise, financials doing well as no credit issue, expect P/Es to be flat for 2018, no recession risk, consumer confidence high, valuations improving, inflation – not expecting a spike, employment strong (signing bonuses), margin pressures with rising rates not a concern, overall outlook is mixed and topline a good economy. Bruce Murrays comments this week include – outlook for markets remain constructive, global economic picture quite bright, with real US GDP growth forecast at 3.9% this healthy rate of growth which is being led by world’s largest economies will support a bullish market.AAII Investor Sentiment Survey – optimism about the short term direction of the stock market rebounds to 3 month high. Flattening yield curve – on average equities have 8 months until earnings peak and 17 months before a recession following a yield curve inversion. “Tariff threats have turned to trade agreements, de-escalation looks likely in North Korea, and the US tax cuts paired with deregulation are showing up in corporate earnings – the US is acting and good things are happening for both the economy and the financial markets(B Wesbury)”. CDN banks report good results – RY has good momentum, strong volume and sales growth as well as higher interest rates (D McKay). PMIs good like China’s NBS manufacturing PMI increased pointing to decent business activity – 51.9.
Negatives: Trade negotiations continue – US against everyone. A number of factors discourage investments in CAD – consumer remains over-levered, concern over higher taxes, a slowdown in the housing sector and internal barriers will confine the exporting of oil, CAD’s largest export (B. Murray). Italian Eurozone political risks dominate headline and trigger a rout in Italian assets. CDN economy too reliant on housing market (Macquarie CM). Moody’s warns of junk bond default avalanches as rates rise. European Union is in an existential crisis – everything that could go wrong has gone wrong (G. Soros). Nothing hurts the stock market more than uncertainty even if that uncertainty ultimately leads to a positive outcome (J. Cramer).
Investment Wisdom: “Never test the depth of a river with both feet – Warren Buffett”
PORTFOLIO MANAGEMENT–Week’s Highlights
Stock of the Days: MFC, PYPL, WMT, AVGO, FTT
New Issues: BNS, NA
Have a great weekend. Bruce
MacKay Weekly Investment Report Contents:
Page 1 - How I see It
Pages 2 & 3 - Notes and Quotes
Page 4 - CDN Mkts
Page 5 – Int’l Mkts
Page 6- Funds & ETFs
Page 7-9 – Favourite Charts
Page 10 – MacKay Group Portfolio Management
Page 11 – Comprehensive Wealth Management
Page 12 – MacKay Group News & Events