Full episode: Market Call Tonight for Friday, December 14, 2018
Kim Bolton, president and portfolio manager at Black Swan Dexteritas
Focus: Technology stocks
With a slew of market negatives and headwinds being cited for the recent sluggish trading action, all the problems can be distilled down to two main issues: slowing growth and trade uncertainty.
For slowing growth it isn’t so much that the global economy is sharply lowering sentiment right now, but instead the growing realization that 2019 could be the peak for the cycle. As a result, signs would begin flashing “recession” by the end of next year or early 2020. Note that there isn’t anything appearing in the U.S. data stream to suggest such a dire outlook, but investors can’t help but adopt a somber economic disposition given the aggressive Treasury curve flattening. In the near term, we expect the yield curve to steepen slightly as pressure will be off the short end and the Fed on hold after the Dec. 19 FOMC meeting. We also think stock prices should at least broadly rise into year-end. The S&P $178 earnings per share (EPS) number for 2019 should hold, which provides strong valuation support at about 2,600 (at least for the first and second quarter in 2019).
To an extent, 2019 has been seen as a peak and price-to-earnings (P/E) won’t have much expansion potential. Should this recession fear come to fruition it would create enormous political headwinds for Trump and the GOP (and should Democrats take the Senate and/or White House while retaining the House, it would imperil the tax bill). Keep in mind deficits are already a growing political problem set to explode as growth decelerates and spending stays unreformed. The consensus is that growth will slow during 2019, but if trade deals are reached the economic outlook beyond 2019 will improve. This would necessitate a shift in asset mix from the current defensive one. We then expect the Fed to resume raising rates. The bottom line is we expect many mini-cycles over the next year that are dependent on various outcomes.
Bought at: $62.72. Sold/reduced at: $174.25.
Red Hat was acquired by IBM on Oct. 28, 2018; we took profit on this 3.5 per cent position.
CISCO SYSTEMS (CSCO.O)
UNIVERSAL DISPLAY CORP (OLED.O)
PAST PICKS: OCT. 31, 2018
- Then: $1,598.01
- Now: $1,591.91
- Return: -0.4%
- Total return: -0.4%
VISA INC. (V.N)
- Then: $137.85
- Now: $135.09
- Return: -2%
- Total return: -2%
- Then: $8.66
- Now: $8.98
- Return: 4%
- Total return: 4%
Total return average: 1%
BSD Global Tech Fund
Performance as of Nov. 30, 2018
- 1 Month: 2.7% fund, 1.8% index
- 1 Year: -2.7% fund, 4.3% index
- 3 Year: 17.9% fund, 32.7% index
Index: S&P 500
Returns are gross of fees and distributions
TOP 5 HOLDINGS AND WEIGHTING
- Amazon.com: 5.7%
- Visa: 5.2%
- Infineon Technologies: 4.4%
- Apple: 4.3%
- Cisco Systems: 4.3%