Market Commentary

Making Cents of the Markets

Listen now to the most recent Making Cents of the Markets on CKNW, where we gave an update on what’s happening in markets and discussed how to spend your money confidently in retirement!

Click to listen here.

Beyond the Markets

Honda Celebration of Light

The largest offshore firework competition in the world is back and this year, Vancouver shines bright for its 30th anniversary of the Honda Celebration of Light!

The festival kicks off this Saturday, July 23, at English Bay with a full day of live music, food and performances before the 10pm fireworks show. Click here for more information.

Be in the Know

“The happiness of your life depends upon the quality of your thoughts.” – Marcus Aurelius.

Cleaning up space junk

The soccer philosopher, Francisco Maturana, used to have a saying:  “To lose is to win a little.” It’s a refreshingly optimistic way to view a negative event. When it comes to large stock market defeats, downturns help clean up the market from fad investments, overvaluations and overall risk.

Lots has been written about how too many tech stocks were trading at overly high valuations. SNAP, which runs the social media app Snapchat, reported broadly negative quarterly results including falling users, lower advertising revenues and deeper earnings losses. The stock fell 37% today to $10. Advertising is cyclical and recession-prone, and online advertising is very competitive: Facebook, Alphabet (Google), and Amazon are all players.

Worse, SNAP is one of those tech stocks that loses money every quarter with no end in sight. Overvaluation? The stock used to be $80 and had a market valuation in the range of $100 billion.

But for investors focused on sane blue-chips and corporate bonds, such crashes are a small victory. It makes the reasonably priced, profitable companies our portfolios focus on, all the more relevant.

The smart money is feeling emotional, too.  But not everyone.

It was an overall strong week for stocks, despite the European Central Bank hiking interest rates for the first time in over a decade. For the first time in a long time, markets seem to be taking bad news in stride and responding positively to good news.

Today’s Purchasing Managers Index (PMI) in the U.S. fell to 47.5 in July from 52.3 in June. Readings below 50 imply economic contraction.

Bank of America’s strategists are finding consistent evidence that institutional investors have thrown in the towel, too.

Allocations to stocks remain at their lowest since October 2008 (the bottom of the Great Recession) while cash levels have rocketed to levels not seen since 2001 (the tech bubble crash aftermath). More than half of fund managers are self-reporting a below normal risks appetite. Not by a little but by a lot:

However, not all money managers are negative these days. The legendary billionaire, Howard Marks of Oaktree is a deep value corporate bond manager akin to Canso Lysander. He eschews economic forecasts, pointing out that nobody consistently knows what is to come. But, what we can know is where we are at now. On a Goldman Sachs podcast this week, he discussed why all this current negativity and depressed prices makes him optimistic and a buyer. Marks quoted the Warren Buffett line: “I like hamburgers. And when they go on discount, I eat more hamburgers.”

Our Strategy

Our portfolios continued to pick up steam with the rise in markets this week. Our consumer discretionary and technology names were this week’s leaders, as they continued to bounce back.

As earnings season dominates headlines, most of our companies that reported surprised to the upside and beat analysts’ estimates. One that is highlight-worthy is Danaher. The healthcare company demonstrated another strong quarter with growing earnings and revenues year over year. The company noted that their strong quarter was based on the increased demand in all three of their operational segments, namely Life Sciences, Diagnostics and Environmental & Applied Solutions. The stock was up an encouraging 7% on the report, with a bright future ahead.

The “bad news = good news” theme is still a key overhang in markets and this week’s “bad” economic data reflected a much-anticipated economic cooldown and helped investor sentiment. Markets understand that with enough “bad news”, the Fed may be closer to taking its foot off the gas in raising rates as aggressively as they have been.

We continued to look for deals this week, shopping around for quality names that this year’s downturn in markets has brought to light, making their valuation much more sensible.

Next week, investors will focus on the Fed’s press conference as they are set to announce their next move in raising rates which will likely guide the market’s direction in coming weeks. We will be watching closely and looking for opportunities to add to the portfolios should markets continue to improve.

Visual of the Week

 

The comments and opinions expressed in this newsletter are solely the work of Pinkowski Wealth Management, not an official publication of Canaccord Genuity Corp., and may differ from the opinion of Canaccord Genuity Corp’s. Research Department. Accordingly, they should not be considered as representative of Canaccord Genuity Corp’s. beliefs, opinions or recommendations. All information is given as of the date appearing in this newsletter, is for general information only, does not constitute legal or tax advice, and the author Pinkowski Wealth Management does not assume any obligation to update it or to advise on further developments related. All information included herein has been compiled from sources believed to be reliable, but its accuracy and completeness is not guaranteed, nor in providing it do the author or Canaccord Genuity Corp. assume any liability.

CANACCORD GENUITY WEALTH MANAGEMENT IS A DIVISION OF CANACCORD GENUITY CORP., MEMBER-CANADIAN INVESTOR PROTECTION FUND AND THE INVESTMENT INDUSTRY REGULATORY ORGANIZATION OF CANADA