Andrew Pyle, senior investment advisor and senior portfolio manager, CIBC Wood Gundy
FOCUS: North American equities
Top Picks: Broadcom, Mastercard, Superior Plus Corp.
MARKET OUTLOOK:
With less than six weeks before U.S. President-elect Donald Trump is inaugurated, few appear willing to fight the tape nor fight the U.S. Federal Reserve. Consensus is that the U.S. will not see a recession at least in 2025 as interest rates and taxes decline. Until we see how policies really shake out after Jan. 20, it is risky to label this market as complacent, even if it is on the expensive side. Balanced fund mandates are going to see a rotation out of an outperforming equity market and into an underperforming bond market. But if that is taking place, the effects are being offset by a continual flow of funds into stocks either for year-end window dressing or by FOMO retail investors.
Even if the new administration delivers on taxes and regulation, but without too heavy of a tariff club and mass deportations, the probability of seeing a third year of gains similar to 2023 and 2024 is low. If U.S. economic demand growth remains strong in response to administration measures, then investors are going to have to prepare for a possible return to higher inflation. The counter argument is that with China now entering a deflationary phase, with a continually deteriorating housing market, this could offset domestic inflationary pressures in the U.S.
As for Canada, the economy is already showing signs of fatigue and if tariffs by the U.S. were to be implemented, then the risk of an eventual recession here would increase sizably. Which is why we are likely to see Canadian equities underperform the U.S., at least over the near-term, though the faster descent in Canadian rates and the cheaper loonie should act as an offset.
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TOP PICKS:
Broadcom (AVGO CDR)
Mastercard (MA CDR)
Superior Plus Corp. (SPB TSX)
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| AVGO (CDR) | N | N | Y |
| MA (CDR) | N | N | Y |
| SPB N | N | N | Y |
PAST PICKS: December 5, 2023
Pfizer (PFE NYSE)
- Then: $29.09
- Now: $25.44
- Return: -13%
- Total Return: -7%
Microsoft (MSFT NASD)
- Then: $372.52
- Now: $453.11
- Return: 22%
- Total Return: 22%
Tourmaline Oil (TOU TSX)
- Then: $64.14
- Now: $63.31
- Return: -1%
- Total Return: 4%
Total Return Average: 6%
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| PFE | Y | y | Y |
| MSFT | Y | Y | Y |
| TOU | Y | Y | Y |