Friday Market Insights – Exceptional earnings week but the stock market failed to respond

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Friday Market Insights – Exceptional earnings week but the stock market failed to respond, with Wayne Wachell and Leslie Cliff

This week's questions

[00:00] : Intro

[00:00] : What happened with this great earnings week?

[00:01:21] : And anything else, I guess Biden spoke, but that’s more political than

[00:02:40] : Canadian dollar. It’s really been on a tear, 81 cents right now. What do we see going forward?

[00:04:25] : So what’s going to signal the end of this party? Because it’s been it’s been a great party.

Leslie Cliff: [00:00:04] Hi, everyone, thank you for attending our Friday video Market Insights. And today is April 30th. My name is Leslie Cliff. I’m here with Wayne Wachell, the two co-founders of Genus. What happened with this great earnings week?


Wayne Wachell: [00:00:19] Well, the story was bigger than earnings, actually. Earnings from the big tech were a blowout. A magnificent earnings couldn’t have been couldn’t have been better. Things like companies like Facebook and Google did very well end up. But also on the other side, commodities did very well as well. Oil was up strongly. Copper was up again, lumber was up again. And that drove the C dollar higher as well. So it was two good things happening, both commodities moving, helping the cyclicals push higher in terms of financials and energy, but also big tech rout as well. But without with with all that going on, the market reaction wasn’t that big. We were sort of flattish for the week. And I think the market said, well, we had a hell of a move here already, so enough. Let’s take a rest here right now. So the market did not respond in a big way to the positive earnings.


Leslie Cliff: [00:01:08] Yeah. Makes you wonder what would have happened if they came out as expected, because they really were. And even nine and just economically sensitive stocks like Caterpillar and some others wasn’t just the tech stocks either. So. Yeah. And anything else, I guess Biden spoke, but that’s more political than


Wayne Wachell: [00:01:27] Yes, you know, State of the Union speeches are all just pie in the sky and they have to get them through the House and the Senate kind of thing. So it’s more aspirational and they think the market takes it as that. Powell came out and had a bit of a talk, he was talking a bit talker, a bit tougher. And on that, from that perspective, too, with commodities moving up, bond rates moved up from one fifty seven in the US ten year to what, one sixty five point sixty three now as we speak. So that kind of that kind of perspective in terms in terms of what we did in the portfolio, we bought a little more Facebook, Facebook based on the good earnings. It’s it’s becoming apparent, companies like Facebook and Google have been really great, have had great growth over the past ten years. But because of the advertising they do in the media aspect of that with advertising dollars, they’re also cyclical to some extent, too. And I think that’s what’s going on here. They’re going to a boost on the advertising side, which is helping their their profits. And so we have a real strong economy this year. Companies like Facebook will will do well.


Leslie Cliff: [00:02:32] So it’s economically sensitive. So one of the questions our clients asked and, I’m sure all clients are always interested in this is the Canadian dollar. It’s really been on a tear, 81 cents right now. What do we see going forward?


Wayne Wachell: [00:02:47] We still has momentum and it has some good fundamentals behind it in terms of what’s going on globally. You know, our our our prosperity is tied to the global global economy. And global economy is here. We see forecasts of plus six percent, U.S. maybe six, seven percent. That’s good for Canada when the rest of the world is doing well. And so we are seeing it manifest in Dr. Copper and Copper going up as well. And so it’s been a great week for commodities, a great week for the C dollar, as well with oil and everything else going up. So from that perspective can go higher. I’m not sure how high it can go. There’s pretty big resistance at eighty five cents, but I can go hit eighty four ish in that range. But what’s going to happen today. But I think through the course of this year, but we’ll see where it goes. But I’d say eighty five by the end of the year could be an objective. We’re, we’re a bit longer there right now in our portfolios and that’s intentional based on our models and our view.


Leslie Cliff: [00:03:38] Good. And that’s long against a benchmark. So we still have big international exposure. So just when I think about the markets, I just think it’s a it’s a perfect environment. You’ve got PMI, which is the Purchasing Manager Manufacturing Index, which is an indicator of future growth. It’s just straight up money supply straight up. You’ve got stimulus coming fiscally and monetarily. You’ve got a Fed that says we’re not even going to think about thinking about raising interest rates. And and you’ve got exploding earnings, exploding GDP and the market’s been kind of flat. Well, it’s at all time highs, but it’s really been hovering around these all time highs. So what’s going to signal the end of this party? Because it’s been it’s been a great party.


Wayne Wachell: [00:04:30] Well, it seems to be probably something to do with the Fed stepping in and doing what the Bank of Canada said last week they’re going to start tightening things up and they’re going to say that until they’re they’re forced to or just it might just go far enough in terms of in terms of the magnitude. We’re seeing numbers right over the over the past month or two, the S&P twenty twenty two numbers have gone up dramatically. And we’re seeing forecast by the S&P earnings around 205 or something like that at twenty two times around forty four or forty five hundred by the end of this year, so targets are in that forty four point five hundred range. We can go there. I think we’ve where we’ve gone as far as we can go right now. And we have to do some time here, I think. But still, the fundamentals are strong. It’s not time to run for the hills just yet. I may change that view in a week or two, but right now there’s a lot of good things going on. But the market kind of not reacting in a positive way since that’s very good news is interesting and a bit of a concern. But we just done so well. The market has done so well. It’s priced in all this good news.


Leslie Cliff: [00:05:38] And just to remind people, we did take a little equity off the table about three weeks ago and we’re waiting for our monthly signal next week to see we may take a bit more


Wayne Wachell: [00:05:46] And we may take a bit more next week. We’ll see where it goes and what the signals are saying. So but it’s so far so good. The market to probably take a correction if there’s some negative surprises in terms of the Fed tightening faster or some kind of downgrading growth. But the the tech sector has really been driven by the interest rates. As rates gone up, the tech sector has gone down. So there’s been a negative correlation between tech and bonds. And so bonds going higher. Could bond yields going higher, could impact the tech sector, but that would also help the cyclical sector. So more and more of this sector as we go as we go forward here. So that’s what you should have been.


Leslie Cliff: [00:06:23] Selling the CanGlobe and buying the dividend slowly,


Wayne Wachell: [00:06:27] Yes, which has more value.


Leslie Cliff: [00:06:28] Yes. So I can’t really hold myself back. We wishing you a happy birthday. Genus is thirty second birthday. And that’s great. And I hope people appreciate seeing all the young talent we have a Genus in these videos. Wayne and I really do them anymore and we’re trying to showcase the great young talent we have. So


Wayne Wachell: [00:06:49] Yes. And same to you, Leslie. Congratulations. And as you mentioned, we have young talent really excited by the talent we have at our firm now that we think the next generation is here. And looking forward to many more years.


Leslie Cliff: [00:07:02] Great. We’ll have a great weekend and we’ll talk to you next Friday. Thank you very much.


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