Andrew Pyle, senior wealth advisor and portfolio manager at The Pyle Group, Scotia Wealth Management
Focus: North American equities

MARKET OUTLOOK

Recession fears have increased this morning in the wake of the negative U.S. ISM readings for August. Manufacturing came in at 49.1, which is the lowest since January 2016 when it hit 48. It also hit 48.9 back in 2012 and in both cases it did not correctly signal a recession, though we are much later in the cycle now. The drop in the ISM employment index to 47.4 is probably more concerning since the engine of growth so far has been the consumer and this has hinged on decent payroll growth. There will be even more attention paid to the August payrolls report this Friday as a result.

I still believe that a recession likely does not occur until 2020, especially with the revised Fed outlook. Today’s data has reinforced the rally in bonds and with the 10-year U.S. yield now below 1.50 per cent, the pressure on the Fed to deliver three quarter-point cuts by year-end has grown. If that takes place, it is still unlikely that bond yields will be able to move significantly lower (1.35 per cent will prove hard to break) and given the higher probability that other central banks will ease policy, the threat of an intensified currency war will increase.

For Canada, the pressure on the Bank of Canada will also be a factor to watch on Wednesday when we get the next policy decision. Economists don’t expect a move, but if Poloz wants to get out in front of a second Fed cut it is definitely possible. The Canadian dollar could test down towards 74 cents if he does.

In terms of equities, the sideways pattern of August is likely going to end and given that we have more than two weeks to go before the FOMC meeting on Sep. 18, odds look as though we will break out of the floor of this range. That would mean the S&P breaking below 2,840 and the TSX moving below 16,000. This level has been key since the start of March, so investors need to look at their allocations carefully.

TOP PICKS

Andrew Pyle's Top Picks

Andrew Pyle of Scotia Wealth shares his top picks: NFI Group, Lithium Americas and PAWZ.

NFI GROUP (NFI:CT)

LITHIUM AMERICAS (LAC:CT)

PROSHARES PET CARE ETF (PAWZ:UW)

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
NFI Y Y Y
LAC Y Y Y
PAWZ Y Y Y

 

PAST PICKS: MAY 29, 2019

Andrew Pyle's Past Picks

Andrew Pyle of Scotia Wealth reviews his past picks: The Stars Group, the XHC and Dollarama.

THE STARS GROUP (TSGI:CT)

  • Then: $22.28
  • Now: $20.48
  • Return: -8%
  • Total return: -8%

ISHARES GLOBAL HEALTH CARE ETF (XHC:CT)

  • Then: $46.38
  • Now: $48.09
  • Return: 4%
  • Total return: 4%

DOLLARAMA (DOL:CT)

  • Then: $43.00
  • Now: $49.57
  • Return: 15%
  • Total return: 15%

Total return average: 4%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
TSGI Y Y Y
XHC Y Y Y
DOL Y Y Y

 

WEBSITE: pylegroup.ca