Andrew Pyle, senior investment advisor and senior portfolio manager at CIBC Wood Gundy.

FOCUS: North American equities


MARKET OUTLOOK:

The first quarter was a pleasant surprise, given the way it started out and considering that the main driver behind the fourth quarter rally – expectations of significant rate cuts this year – faded away to now speculation that there may not be any cuts at all. I would call this the Teflon rally for that reason. We have not had a five-per-cent correction in either the  S&P/TSX Composite Index or the broader U.S. market since October, or 153 days. While some believe this is an overbought condition, it’s useful to keep in mind that we went 397 days back in 2020-2021 without a meaningful pullback. The one concern is that momentum might slip. It actually did during the first six weeks of the quarter, but it recovered through March.

The problem is that we don’t know if stocks can tolerate an actual decision by the U.S. Federal Reserve to hold rates where they are through the election. There was even stronger momentum back last July, but when Fitch announced the downgrade on U.S. debt and payrolls for July exceeded expectations, sentiment turned negative quickly. I don’t expect a repeat, but if this Friday’s payrolls come in north of 300,000, then the “no cut” tail risk will rise. In addition, while the Baltimore bridge collapse is going to have a negative near-term impact on jobs and output, once the shipping lanes are cleared and reconstruction starts, this could create a bounce in activity. The focus should also be on how much inflation spillover there is, as this could feed back into the Fed policy expectations.

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TOP PICKS:

Andrew Pyle's Top Picks

Andrew Pyle, senior investment advisor and portfolio manager at CIBC Wood Gundy, discusses his top picks: Adobe, Brookfield Infrastructure Partners, and Vanguard FTSE Emerging Markets All Cap Index ETF.

Adobe (ADBE NASD)

Last week’s summit conference was well received by analysts and the company has an improved outlook for integration of AI across all of its platforms.

Brookfield Infrastructure Partners (BIP.U TSX)

Global growth looks more resilient and will pick up as rates drop and a lack of investment in key areas has allowed for contracted price increases. Dividend growth accelerated this past year.

Vanguard FTSE Emerging Markets All Cap Index ETF (VEE TSX)

Recent signs of improvement in Chinese economic activity and robust growth in India should lead to an outperformance in emerging markets vis a vis U.S. markets. The company also has a higher weighting to China and India than some other passive ETFs. 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
ADBE NASD Y N Y
BIP.U TSX Y N Y
VEE TSX N N Y

PAST PICKS: MARCH 7, 2023

Andrew Pyle's Past Picks

Andrew Pyle, senior investment advisor and portfolio manager at CIBC Wood Gundy, discusses his past picks: iShares Core Canadian Government Bond Index ETF, Enbridge, and Power Corporation of Canada.

iShares Core Canadian Government Bond Index ETF (XGB TSX)

Then: $18.95
Now: $18.81
Return: 0.7 per cent
Total Return: 2 per cent

Enbridge (ENB TSX)

Then: $52.70
Now: $48.70
Return: -8 per cent
Total Return: -0.4 per cent

Power Corporation of Canada (POW TSX)

Then: $37.07
Now: $37.98
Return: 2 per cent
Total Return: 10 per cent

Total Return Average: 4 per cent

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
XGB TSX Y Y Y
ENB TSX Y Y Y
POW TSX Y Y Y