Here’s What We’re Thinking – May 18 , 2016
Investment Strategy: Scarcity of catalysts likely to keep markets range bound; Fed rate uncertainty continues to fuel anxiety
May 19, 2016
Equities: With the exception of the Energy and Materials sectors, Canadian and U.S. equity markets have traded mostly flat over the past month as corporate earnings underwhelmed (see below) and valuations generally remain at the high end of the historical range. Underscoring the recent strength in commodities, we estimate that over 90% of the S&P/TSX Composite Index’s 6.5% YTD gain has come from the Materials and Energy sectors. With a combined weight of 32% of the TSX (vs. only 10% for the S&P500), investors underweight these sectors have largely underperformed so far this year. While we have been advocating for a return to a market weight position in Energy due to improving fundamentals, we missed the strong rally in Materials as we were reluctant to add gold equity exposure (due to high volatility and low dividend yields) and continue to believe that the market for base metals is oversupplied.
Read More…
Legal
This publication has been prepared by Scotia Capital Inc. and is intended as a general source of information only and should not be considered as personal and/or specific financial, tax, pension, legal or investment advice. We are not tax or legal advisors and we recommend that individuals consult with their qualified advisors before taking any action based upon the information contained in this publication. Opinions and projections contained in this publication are our own as of the date hereof and are subject to change without notice. While care and attention has been taken to ensure the accuracy and reliability of the material in this publication, neither Scotia Capital Inc. nor any of its affiliates make any representations or warranties, express or implied, as to the accuracy or completeness of such material and disclaim any liability resulting from any direct or consequential loss arising from any use of this publication or the information contained herein. This publication and all the information, opinions and conclusions contained herein are protected by copyright. This publication may not be reproduced in whole or in part without the prior express consent of Scotia Capital Inc.
