Kim Bolton, president and portfolio manager of Black Swan Dexteritas
Focus: Technology stocks

MARKET OUTLOOK

The story for the global stock markets has been boringly consistent for June and the first couple weeks of July as central bank optimism and to a lesser extent U.S.-China trade hopes around the G20 offset accumulating growth red flags. That central banks are set to adopt incremental accommodation has never really been in doubt, but the question remains as to why the stock markets would care so much at present valuations (for example, the S&P 500 is near 17 times) when policy is already extremely easy. German 10-year yields at -40 basis points hasn’t helped that country’s economy much, do investors think -50 would be more effective? The bottom line is that the combination of monetary optimism coupled with U.S.-China trade “hopes” will help to bolster equities. But sluggish international growth, earnings red flags and unappealing valuations will eventually drive the narrative, pressuring stocks in the process.

Your BSD Global Tech Hedge Fund is defensively positioned in the short term, protecting our well-earned gains so far this year. In the months ahead, uncertainty will ebb and flow around hopes for trade deals and other unplanned events, including a possible direct confrontation with Iran. The key issue for the next couple of months will be the give-and-take between the performance of the economy, both domestically and internationally, and the Fed’s monetary policy decisions. Market expectations are still set on at least 50 basis points of Fed easing through year-end, with some minor disagreement about the timing. But if the data on employment remains favorable and inflation picks up just a bit, the Fed could extend its pause indefinitely rather than waste its limited resources. Any further easing could be better used during a future economic downturn.

These uncertainties will only fuel our expectation for more market volatility, which plays nicely into our active management trading tactics.

UPDATE

We sold TABLEAU SOFTWARE (DATA.N) within one-year of recommending it as a top pick. Tableau was acquired by Salesforce on June 10, 2019. We took profit on this 3.5-per-cent position.
Buy price:  $59.97
Sell/reduce price:  $169.34

TOP PICKS

ALPHABET INC (GOOG.O)

INFINEON TECHNOLOGIES (IFNNY.PK)

PALO ALTO NETWORKS INC (PANW.N)

PAST PICKS: JULY 9, 2018

RED HAT (RHT.N)
Acquired by IBM on July 9, 2019.

• Then: $139.95
• 07/08/2019: $187.71
• Return: 34%
• Total return: 34%

TWITTER (TWTR.N)

• Then: $44.14
• Now: $37.58
• Return: -15%
• Total return: -15%

ACTIVISION BLIZZARD (ATVI.O)

• Then: $76.84
• Now: $45.57
• Return: -41%
• Total return: -40%

Total return average: -7%