Bullish call for oil. We like TSX but continue to lean towards U.S.: strategist
joining us to break it all down is Philip Peterson he’s Chief investment strategist at IG wealth management nice to see you good to be here another busy one for investors to digest but overall what’s your sense of how the market feels right now well it’s been a positive earning season when we look at it I think the last number I saw was 80% of the companies on the S&P 500 have surprise to the upside that is near the the highs for what we expect in terms of earning surprise that’s good and I think guidance has been decent as we go forward so it all falls in line with an improving and stable US economy and improving and stable global economy and that’s being reflected in profits and this interest rate story or if there are interest rate Cuts specifically in the US how does the market interpret all of that well that’s been the great uncertainty or the great unknown over the last say 9 to 12 months how many Cuts will the FED uh um provide the marketplace and Powell I think last week did help solidify the direction that no interest rate increases are on the table or even expected or even cont PL at it is Cuts Now is it going to be two or three or is it going to be two or one I think that is where we’re at right now with the market I’m leaning more towards two or more likely one out of the United States versus two or more likely three out of Canada so well I want to build on that because I guess for for stock market investors if the economy has been holding up if the earnings picture has looked pretty good and there’s even an indication that maybe the FED will ultimately cut rates this year it’s like a nice little soup for people to um nibble on the um the Canada story we are likely to see interest rate Cuts sooner here at least that is the current market View and I guess it sort of opens the door what what kind of economy are we staring at in this country right now right well if we look at it over the last nine months the Canadian economy really hasn’t grown by much at all if at all uh and it’s all been driven by exports at least that’s what the data seems to show in the fourth quarter was the export driven oil markets that really drove gains for the Canadian economy outside of that you there it’s been very very um modestly negative growth if that continues well that’s just the impetus for the Bank of Canada to cut rates along with the fact that inflation is within their target zone so everything is leading to the Bank of Canada uh being in a position where they could be comfortably cutting so it’s interesting because on Main Street we see it in front of us we see it on social media people frustrated by interest rates and inflation uh all these factors that uh impact everyone’s daily life life and yet the stock market in Canada I mentioned it’s been on a roll recently uh it hit a record high earlier this year some people say if the story of cyclical stocks commodity stocks that kind of stuff finds a bid globally that helps us uh there was a one American strategy firm uh last week that was telling us that in a situation where Canada’s cutting rates faster in the US that historically has actually been pretty good for our TSX so what are the prospects from here on out do you think for the Canadian stock market well we like it we we agree uh that it is a more cyclical market so if the global economy is doing better if oil demand is increasing if if gold demand and copper demand is increasing that’s good for the TSX the banks I think will kind of chug along they continue to to find areas of profitability and will do well so when you have Commodities working and you have financials that are decent that makes for a classic TSX rally okay now we have moved into may we talked a last week with people about the idea of sell in may go away the idea that between call it may and November you don’t get the same kind of returns versus what you would get between call it November and April we were actually looking at the historical data on that and it’s uh not overwhelming in in in in in in the idea of just getting out of the market but nevertheless could this be a more volatile stretch the next few months in your opinion we do think that’s going to be the case now when we think about the cell in May it doesn’t mean that may through uh October are negative months it’s just they are less positive right they’re not as strong as November through April but we would align things with we call it the three pillars of uncertainty so we mentioned about one interest rates right that’s one uncertainty that we have seasonality is the other one that we you do have to recognize that the markets are a little bit more volatile than the summer ones the third one being the US election and so as you have this uncertainty Weighing on the markets following a very very strong first quarter yes you can expect a little bit volatility through the summer months but I would say that that is an opportunity to accumulate positions into equities for what could be a very strong fall are there are there any particular sectors that you like if you’re adding during a period of uncertainty well it obviously the ones that are down more I think though that show decent prospects of going forward so right now we do believe that the risk of recession is very low we think that we are in a cyclical upturn economically in the United States and globally so that would lean in favor of Commodities Industrials you know consumer discretionarily valued these are areas that I would say you know what over the course of the next four months five months when we see pockets of volatility this is an opening to accumulate and then just a a rem well we’re looking at the one-year chart so off the lows of last year the TSX had this monster runup the S&P 500 in the US also uh did quite a number and then ended up with a gain on the year last year of something like 24 25% and we were talking to a strategist last week about the American Market who said because of everything you outlined earlier in this conversation this is still going to be in in their opinion a good year maybe just not as strong as what we saw last year for the US market now the the Canadian stock market did not see the same kind of overall growth last year as the S&P 500 we’re up right now 4 5% for for this year um what kind of what’s a realistic expectation for for growth for the TSX do you think for the rest of this year great question so I would put it in the range of of potentially uh say upper single digits like 8 to 10% I think is realistic but here’s the challenge with the TSX versus the S&P 500 in this environment the range of outcomes is wider for the TSX you know meaning it could do a lot better or it could actually underperform because of the volatility inherent in these sectors so while we like the TSX we lean a little bit more in favor of the us right now
Philip Petursson, chief investment strategist at IG Wealth Management, joins BNN Bloomberg to discuss earnings season and rate cut expectations. Petursson is looking at three pillars of uncertainty that could affect the stock market performance in the months ahead.
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