Hap Sneddon, chief portfolio manager and founder at CastleMoore Inc.

Focus: Technical analysis and macro portfolio strategy
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MARKET OUTLOOK
Today we have a divergence between soft (sentiment) and hard (actual) economic data, corporate earnings that are quite respectable, and a Fed that views the slip to 0.7 per cent Q1 GDP growth as only temporary. Investors are looking ahead too, with a Fed funds future now pricing in a 90 per cent probability of a June rate hike.

Though there seems to be some cross-currents, the markets and Fed want to run with the inflation/growth theme, and this thesis may very well come to pass for a period of time, a period that is synchronised with the technical view that markets will be quite strong through to the end of 2017, and possibly into 2018, then struggle. Said another way, rising inflation expectations that turn out to be transitory with a Fed that wants a higher overnight lending band (currently 0.75 per cent to 1.00 per cent) has the potential to be the catalyst that bookends or brings final resolution to the move off the lows in 2009 — after all, there are still unaddressed structural challenges.

This requires an investment strategy that recognizes that we remain in a bull market in stocks and bonds but also one that adjusts portfolio convexity — the balance between pro-growth and defensive themes — as we move throughout the next year.

TOP PICKS

SIERRA WIRELESS (SW.TO) – Last bought on April 25, 2017 at $34.94
Sierra Wireless, a mobile computing and “Internet of Things” communication company, recently printed Q1 results and an outlook that ran well in front of the street estimates. EPS came in at $0.24 versus consensus of $0.16 and guidance was raised to $0.24 to $0.32 versus a consensus of $0.17. An increasing expectation of more new design wins in a vastly growing space (Internet of Things), a keen focus on cost controls and a strong technical picture one year out make Sierra a good holding in Canadian tech. Target $85.00.

ISHARES NASDAQ BIOTECHNOLOGY ETF (IBB.O) – Last bought on January 19, 2017 at $283.97
The biotechnology sector is one of a few places, along with the pure health-care sector, that is in a secular bull market. This allows investors to look past any structural or economic challenges or even the politics of the day, and know that biotech is a growing and important sector that will no doubt change humanity as other meaningful movements did, such as mass production, growth of the baby boomer generation and the spread of the PC. Drug and therapy pricing, ethics and political posturing may continue to provide negative shocks at times. However, the long-term benefits are lasting. Target $385.

ISHARES S&P/TSX CAPPED CONSUMER STAPLES INDEX ETF (XST.TO) – Last bought on March 24, 2017 at $53.82
Canadian consumer staples is the strongest sector in weekly relative strength sector analysis and is rising on the monthly view, too. When you get both short- and intermediate-term strength in a sector, odds increase substantially of positive market outperformance one year out. By choosing an ETF over individual securities in a strong sector, investors make sure they get the general move correct over trying to pick the right couple of companies in a sector where execution is very important. In addition, the conservative nature of staples plays a role in establishing portfolio convexity or the balance between pro-growth and defensive positions mentioned in our outlook. Target $65.00.
 

PAST PICKS: APRIL 18, 2016

APACHE (APA.N)

• Then: $53.44
• Now: $51.18
• Return: -4.22%
• TR: -2.09%

HEALTH CARE SELECT SECTOR SPDR ETF (XLV.N)

• Then: $70.67
• Now: $75.40
• Return: +6.70%
• TR: +8.41%

ISHARES S&P/TSX GLOBAL GOLD INDEX ETF (XGD.TO)

• Then: $12.54
• Now: $13.19
• Return: +5.22%
• TR: +5.25%

TOTAL RETURN AVERAGE: +3.86%