Ross Healy, chairman at Strategic Analysis Corporation
Focus: North American large caps


MARKET OUTLOOK

As this bull market ages, what strikes me is that the real issue with this current market environment is that managements are no longer creating value, they are creating price. The market has also become so expensive that some of these efforts are being exposed for what they are and this is causing the market to become wary. If corporate managements have only been successful in creating price, what could be said about the outlook for the stock market? How long can a price creation market continue if we don’t get some value support?

We’ve also witnessed some very unusual market volatility with the Dow 600 points up and then 800 points down. That’s a lot of points in a short period of time. This kind of daily volatility has not been seen since 1987. In the period leading up to the break of Black Monday, the number of two per cent daily swings in the market increased very substantially. It was the market’s way of indicating that it didn’t have a clue as to which way it was going. In my experience, when market prices do not know what they want to do, they tend to fall. This is not to say that I expect another 1987 type of crash landing, however, I do not like the market’s technical action.

At least two notable technical analysts observe that investor sentiment is quite poor, citing a very low put or call ratio and other measures as evidence that the market is actually quite cheap and is setting up for a good 2019. But I would like to offer another side of the issue. As Nick Taleb wrote in Fooled By Randomness, just because something has occurred many times at the same time as something else, doesn’t mean that there is causality: it could be simply a randomness that looks like causality. What I see so far is not a flight to cash, but a flight of investment dollars into ETFs on the assumption that risks there are less because, well, they must be less.

My market parameters which I have offered every month on BNN Bloomberg haven’t changed by much. The floor value for the S&P 500 has slipped a bit and now stands almost right at US$2,500. That puts the S&P in the centre of our range, which is bounded on the top by its fair market value for that index or 3,062 and technical support at 2,500. I expect that the bottom will hold for now, but note that I said “for now.”

TOP PICKS

Ross Healy's Top Picks

Ross Healy, chairman at Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management, shares his top picks: Laurentian Bank, Pretium Resources and BCE.

LAURENTIAN BANK (LB.TO)

PRETIUM RESOURCES (PVG.TO)

BCE INC (BCE.TO)

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
LB N N Y
PVG N N N
BCE N N Y

 

PAST PICKS: JAN. 19, 2018 

Ross Healy's Past Picks

Ross Healy, chairman at Strategic Analysis Corporation and portfolio manager at MacNicol & Associates Asset Management, reviews his past picks: Yamana Gold, Enbridge Income Fund and CIBC.

YAMANA GOLD (YRI.TO)

  • Then: $4.18        
  • Now: $2.95        
  • Return: -29%      
  • Total return: -29%

ENBRIDGE INCOME FUND (ENF.TO)
Acquired by Enbridge (ENB.TO) on Nov. 12, 2018. Enbridge Income Fund shareholders got 0.7029 shares of Enbridge.

  • Then: $29.15     
  • Now: $42.85      
  • Return: 3%          
  • Total return: 10%

CIBC (CM.TO)

  • Then: $122.53   
  • Now: $115.23    
  • Return: -6%        
  • Total return:-3%                                                      

Total return average: -7%

 

DISCLOSURE PERSONAL FAMILY PORTFOLIO/FUND
YRI Y Y Y
ENF N Y Y
CM N Y Y

 

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