Featured Article

‘Sizable Amounts Of Short Covering’ In Canopy Growth

Posted by Wayne Duggan

on Friday, 1 March 2019 9:11

Canopy Growth Corp CGC 0.27%, one of the hottest stocks in the market so far in 2019, got yet another boost Thursday when the company announced celebrity Martha Stewart would be joining the company to advise on the development of marijuana products for humans and pets.

In addition to the good fundamental news, financial technology and analytics firm S3 Partners analyst Ihor Dusaniwsky said Thursday he is seeing signs of a potential short squeeze ahead that could propel Canopy stock…Click here for full article.

Crypto Firms Consolidate Amid Push For Legitimacy

Posted by Alex Kimani

on Thursday, 28 February 2019 9:32

Despite an environment rife with economic and political instability, global M&A value in 2018 reached near-record levels as markets remained unhampered by the heightened geopolitical risk. The cryptocurrency space was not nearly as rampant, yet the industry still managed to record a decent amount of consolidation as companies looked to beef up their platforms through the acquisition of like-minded entities.

But now another trend is emerging: crypto companies are using ‘backdoor listings’ to ease into…Click here for full article

Millennial Debt Soars Past $1 Trillion

Posted by Zero Hedge

on Wednesday, 27 February 2019 11:28

The debt load marks the highest exposure for the group since late 2007 at a time when younger adults under 35-years-old have decreased their spending compared to previous generations. A Friday University of Michigan survey determined that this was likely due to weakened job prospects, student loans and delayed marriage.

With millennial consumers not consuming, several policies to boost young adult spending have begun to enter the political dialogue, such as student loan debt …Click here for full article.

Test Drive the Hard Rock Advisory Journal for Only $7!

Posted by MoneyTalks Editor

on Friday, 22 February 2019 14:27

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Take HRA for a “test drive” for 90 days for only $7 – If you are not satisfied, you can cancel at any time during the 90 day trial period and pay only $7 USD. Otherwise your subscription will continue automatically after the 90 day period at the regular quarterly auto-renew rate of $67.50 USD.

Best Start Since 1987

Posted by Ethan Dang

on Friday, 22 February 2019 11:16

It is always darkest before dawn. The fourth quarter of 2018 was full of market uncertainties and concerns, such as U.S.-China trade tensions, that gripped the global markets. Financial markets are forward-looking, forecasting machines; as a result, many of the risks were being priced into the markets during the corrective phase. From peak to trough of the correction, the S&P 500 declined about -20% and the TSX dropped about -18%. Despite the negative market sentiment, the underlying macroeconomics and fundamentals remained sound and stock valuations had returned to a more reasonable level. After the correction low was put in on December 24, 2018, investors went shopping on Boxing Day and delivered 5% and 3% gains for the S&P 500 and TSX respectively in a single day. The ensuing rally has been relentless, producing a V-shaped recovery and bringing the S&P 500 and TSX within 5% of their all-time highs. This rally has been impressive even by historical standards, producing the best start to the year since 1987.

Just as uncertainties and fear took hold of the markets last Fall, we have seen those concerns alleviated by various developments in 2019. Let’s take a look at the key concerns and see how they have been addressed.

Concern #1: Slowing Global Economic Growth

  • Counterpoint: 2019 Forecasted Real GDP Growth*: U.S. = 2.5%; CA = 1.9%; EU = 1.5%; Japan = 1%; China = 6.2%; India = 7.2​
  • Takeaway: Despite slower economic growth compared to previous years, major global economies are still growing at a good pace on aggregate and corporate earnings remain strong.

Concern #2: Fear of Global Recession

  • Counterpoint: 2019 Recession Probabilities for major economies*: 15% to 25%
  • Takeaway: Although economic recession probabilities are not insignificant, they are relatively low for 2019. Yield curve inversion, which has been a reliable precursor to recessions, has not occurred.

Concern #3: Tighter Monetary Policy (central banks hiking interest rates)

  • Counterpoint: U.S. Federal Reserve reversed their aggressive stance on interest hike rates from December 2018, expressing a patient and data dependent approach. In Canada, just one rate hike is expected in 2019, while Japan and the Euro Zone are expecting no rate hikes this year.
  • Takeaway: Accommodative central banks are a tailwind for the markets. Slower rate hikes are favourable for businesses (lower cost of borrowing) and consumer spending (more disposable income).

Concern #4: Heightened Trade Uncertainty (U.S. vs. China trade war)

  • Counterpoint: If President Trump wants to win the next U.S. election in 2020, he is likely to release pressure on the trade conflict at the maximum point of leverage to maintain confidence in the U.S. economy.
  • Takeaway: Trade uncertainty remains a pending issue and is the biggest risk for global markets, but it is likely a transient concern when viewed through the lens of politics and game theory.

*Source: Bloomberg

Given the extent of the rally from the Dec 24th low, it would not be unexpected to see a short-term pullback or consolidation develop in the markets. However, from a charting perspective, most North American stock indices have now moved back above their respective 200-day moving average, which is an important technical development and a sign of strength in this recovery. The odds of a retest of the December 2018 lows have decreased. 2019 is proving to be an interesting year for the markets, like every other year!

Ethan Dang, CFA, MBA is a Portfolio Manager at McIver Capital Management at Canaccord Genuity.

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