Andrew Pyle, senior investment advisor and senior portfolio manager, CIBC Wood Gundy
FOCUS: North American equities
Top Picks: Alimentation Couche-Tard, Suncor Energy, Shopify
MARKET OUTLOOK:
As much as the recent tone in markets since early April has been more constructive, I still think equities are not out of the woods. Rallying on a delay of a 50 per cent tariff on the European Union is almost nonsensical and the jump in May U.S. consumer confidence is pulling almost directly from the truce with China and market rebound. If the S&P 500 Index fails to break sustainably above 6,000 in the coming days, then I think we are going to see back-filling and a potential re-test of the 5,000 area.
As for Canada, the setting of new highs for the S&P/TSX Composite Index and extended gains in Europe underscore the theme of continue rotation away from U.S. assets, though I think even these markets are likely to run out of steam. Similar to April, downside should be limited relative to the U.S. and used as an opportunity to pick away at sectors that can do well in a higher long-term yield environment. That would include insurance, diversified financials and tech but I also see value in large-cap energy.
The recent blowout in longer-term bond yields should not be overlooked as a potential threat to not only the economy but stock valuations. The key issue is what fiscal path the U.S. ultimately travels down. When real yields were low and much lower than the pace of growth, deficits and debt expansion were not viewed as credible threats by the street. Now that real long yields are in excess of two per cent and growth could easily hit zero for 2025 or worse, bond markets could continue to unwind.
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TOP PICKS:
Alimentation Couche-Tard (ATD TSX)
Suncor Energy (SU TSX)
Shopify (SHOP TSX)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ATD TSX | N | N | Y |
| SU TSX | N | N | Y |
| SHOP TSX | N | N | Y |
PAST PICKS: April 1, 2024
Adobe (ADBE NASD)
- Then: US$502.09
- Now: US$416.29
- Return: -17%
- Total Return: -17%
Brookfield Infrastructure Partners (BIP-U TSX)
- Then: $41.26
- Now: $45.62
- Return: 11%
- Total Return: 16%
Vanguard FTSE Emerging Markets All Cap Index ETF (VEE TSX)
- Then: $34.22
- Now: $39.44
- Return: 15%
- Total Return: 18%
Total Return Average: 6%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| ADBE | Y | Y | Y |
| BIP-U TSX | N | N | N |
| VEE TSX | Y | Y | Y |
