Outlook for July 2019

Summer doldrums are here, but no loss of excitement in the markets. Every week we hear the same beat of the drums — trade negotiations, political circus, central bank policy commentary.

The treasury rates continue to weaken and bond market continues to price in rate cuts from the Fed and other central bankers. The amount of negative yielding debt is at a record and more securities continue to trade in negative territory. Whether this will result in an actual recession is anyone’s guess at this time.

The stock markets have done extremely well so far in 2019. The drop in markets in Q4 2018 and the low starting point for the YTD performance numbers help in showing spectacular returns.

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Outlook for June 2019

After a record climb between December and April, the market is cooling off again. May ended up being a bad month for a lot of sectors as the tariffs/trade war rhetoric picked up steam.

Not only is the US now targeting a trade war against China, but also Mexico — thats 2 out of 3 largest trading partners. Of course, investors are rushing to safe havens now, so treasuries & gold are doing well. Following graphic provides a quick overview of market sentiment at the end of May 2019.

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Outlook for May 2019

It’s earnings season amid record low volatility — which is turning out to be interesting to watch.

Companies are clearing the low set thresholds easily with comparable or declining revenues and high earnings thanks to the record buybacks. For instance, Apple’s latest quarterly result show very similar numbers as they were four years ago, but trading at high price thanks to the reduction in share count.

On the central banks front, non-US central bankers are caving to the reality. From the Canadian CB to a handful of European CBs, all have changed their tones and dropped the rate hike bias completely — and already discussing rate cuts. This week’s communication from the Fed also confirms that rate hikes for this cycle are over.

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Outlook for April 2019

The stock market is on a tear lately with plenty of companies hitting all time highs, as central bank liquidity and FOMO from investors continue driving the increased stock demand. Valuations remain silly and have gotten even sillier over the past couple of months.

However, on central bank front, the Fed seems to be caving to the market pressure and signaling that the rate hike is done for this cycle. The bond yields continue to fall as the stock and bond market outlook continues to diverge.

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Outlook for March 2019

The stock market sure has roared back to life since the dip in December 2018. Quarterly & annual earnings season is in full swing, and while some companies have beat the low bar previously set, a lot of companies are guiding down for the coming quarters.

On the central bank front, the Fed seems to be caving to the market pressure and signaling that the rate hike is done for this cycle. There are some market indications that we may have one more raise, but thats it. It will be interesting to see where things go from here. Meanwhile in Canada (where I am based), the BoC is following suit and also signaling the end of rate hike cycle. Again, I remain vigilant on this front in the coming weeks/months.

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