Today we await the Federal Reserve decision which is more then likely to hold steady on rates. The surprise has been the economy still going strong in the U.S. which may lead the Federal Reserve to stretch the timing of a rate cut decision out even further. I am in the camp that it might not be until the end of the year before this may happen which would coincide with a U.S. presidential election. The economy on both sides of the border has been slowing, and so has inflation, but not yet at the desired level so it gives no reason to cut rates at this time. The market seems to be trading with this news in their back pocket, that rates will eventually come down.
The markets appear to be broadening out which is a good sign to a healthy market and not all of the funds are going to just seven companies. Actually, if you look closely, Tesla has been the worst performer this year with Apple not far behind. This is usually what happens when companies reach a critical size and those seven companies by far outweigh all the rest of the companies. It appears we are now in a period of growth - which better deliver or it will get punished- and there are a lot of companies with high growth expectations.
On the Canadian side we have been quietly adding to our energy names and to the iShares U.S. Small Cap Index as these companies are real cheap and look great going forward. We read about AI, semi-conductors and data centers everywhere but what doesn’t get mentioned is where the power is going to come from. It is going to come from our utilities and these data centers are going to need a lot of power so the poor performing utility companies have some positive tail winds coming and we are well positioned.
On the U.S. side I was removing some Valero as the refiners have been huge out-performers and adding to some agriculture areas that have been overlooked for a while.
We have a good amount of money on the sidelines on both sides of the border as it has been a long time since we have had any meaningful pullback and I would rather be cautious in here rather than jumping in with both feet. So when the opportunities come along we will be putting this money to work.