Insights

Friday Market Insights – Investor & consumer confidence causing all time highs – taking some profits

person holding a phone with financial charts on the screen

Watch Friday Market Insights – Investor & consumer confidence causing all time highs – taking some profits, with Grant Conroy and Justin Hahn

This week's questions

[00:00] : Intro

[00:00:21] : What happened in the markets this week?

[00:01:31] : With the markets hitting all time highs today, again, I think what are the tailwinds and what are the headwinds that are out there that we should focus on?

[00:02:38] : Have we changed and have we made any changes in the portfolios?

[00:03:19] : Is cash and an asset class? Can we consider it an asset class?

[00:04:12] : There seems to be still though a lot of crowding in those large stocks in the market, the sort of big tech names that led the way last year. And is that a risk overall as well?

 

Subscribe to the Friday Market Insights Newsletter

Subscribe to receive our Friday Market Insights Serie

Select list(s) to subscribe to


By submitting this form, you are consenting to receive marketing emails from: Genus Capital Management, 860 - 980 Howe Street, Vancouver, BC, V6Z 0C8. You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Grant Conroy: [00:00:04] Welcome, everybody, to this version of Friday Market Insights. Today, I myself, Grant Conroy, portfolio manager and partner at Genus, and Justin Hunt, who is our macro guru at Genus. And jump in right in Justin the traditional question, what happened in the markets this week?

 

Justin Hahn: [00:00:23] Yeah. So this week we saw the S&P 500 start off to continue its momentum from last week, up about two percent for this week. The week started off and the macro data wise, with the IMF increasing global GDP estimates up to about six percent from five point five percent that they estimated in January. During the middle of the week, a lot of the focus was on the US Federal Reserve’s minutes. But that became more of a non-event because it just reiterated the same things that they were saying during the press conference, such as they’re going to be patient during the next first rate hike as well as more patients in terms of tapering their balance sheet. The biggest thing on investors minds for this week was also the infrastructure plan and more about what’s going to be in the bill and more details about it. But there’s still a lot of uncertainty around that.

 

Grant Conroy: [00:01:14] Right yeah, it seems every week there’s something out there to focus on or something, and every time I do this video, it seems that the markets are all time highs. So either I’m a lucky charm or the markets just continue to get new highs every week. But having said that, with them hitting all time highs today, again, I think what are the tailwinds and what are the headwinds that are out there that we should focus on?

 

Justin Hahn: [00:01:38] So the biggest tailwinds we see for the market is the upcoming stimulus bill for infrastructure spending, which is going to help continue to stimulate the economy as well as the global vaccinations that’s going to happen throughout the year. Some of the headwinds, though, are more of the inflation numbers as well as market valuations. Last night we saw China’s inflation numbers a bit ahead of the estimates. And overnight we saw futures fall on that news. Chinese inflation does have an impact on US inflation as well, because a lot of the parts were still made in China. In addition to this, we also expect some of the corporate tax rates to increase with the upcoming infrastructure plan, the proposed tax increases from twenty one percent to twenty eight percent. But we believe there is going to be some kind of compromise around the twenty five percent mark.

 

Grant Conroy: [00:02:25] Right. And I guess that probably takes a while to kick in. But the market looks forward, I presume. So how do we view the outlook given all of those points you just mentioned and and have we changed and have we made any changes in the portfolios as a result?

 

Justin Hahn: [00:02:42] In terms of our portfolio, we recently actually moved our equity weightings down in order to favour cash. This was a move due to our signal the world equities versus cash signal turning negative due to some of the things I mentioned, such as the higher inflow valuation measures in the equity markets, as well as different inflation indicators ticking up. We saw the Canadian CPI signal increase as well as the German PPI signal also increased there.

 

Grant Conroy: [00:03:11] Right, and as we as we’ve made those changes and seen through the week some of the changes we’ve made and we move into a bit more cash. Is cash and an asset class? Can we consider it an asset class? Do you think?

 

Justin Hahn: [00:03:25] Yeah, we believe that cash is an asset class, but and is very important during the times when bonds and equities are looking very toppy as they are now. It also gives us the ability to hold something in order to use it going forward. If there is a big market pullback, we’ll have some cash that we’re able to spend and put it into either bonds or equities. We’ve also been overweight on equities quite a bit throughout last year and this year during the recovery and the bounce back to the market. So this is some of the profit taking and we’re just taking a little bit of a less aggressive stance, right.

 

Grant Conroy: [00:04:01] That’s great. Thank you. And and hopefully for many of the clients that are watching that notice the way actually in terms of the performance, because as well, through the last 12 months or so. There seems to be still though a lot of crowding in those large stocks in the market, the sort of big tech names that led the way last year. And is that a risk overall as well?

 

Justin Hahn: [00:04:25] Start crowding still remains a big risk, indeed, as we saw during last month, we saw the technology sector crash almost 10 percent and correct, but it did come back quite a bit. But it’s still behind the broad market. A lot of the other sectors in the market have gone to new highs while the technology stocks still remain a bit lower. A lot of these companies have also done really well during the pandemic and have fared or have all have been actually increasing labor force and increasing profits during these more digital times, as well as people working from home and people schooling from home, as well as the economy opens up. We expect a lot of these companies to miss some of their projections due to an overestimation and those estimates come down. So there’s a big risk there still in the technology side.

 

Grant Conroy: [00:05:17] And I guess it’s a little bit of a prisoner’s dilemma. If nobody sells, they all carry on moving higher and it’s all good. But as soon as somebody sells and everybody runs for the exit, I guess you could see some abrupt moves and some of those larger names at some point. And finally, I notice the AAII Investor Sentiment was released this week and the bullishness level was the highest since twenty eighteen. So just to put some context, I guess it’s a survey where they ask people, do you think the market’s going up? Are you bullish? You think it’s going down or are you bearish or is it neutral? And the amount of bullish responses was a very high level. Is that a good sign?

 

Justin Hahn: [00:05:57] Investor confidence is always good for the market as people continue to buy, but we’ve seen that these sentiment indicators can drop quite quickly and sharply. In addition to this, however, we’ve also seen consumer confidence at all time highs as well as PMI is at all time highs. So all three kind of reinforce the story of more confidence in the economy and in the markets for investors.

 

Grant Conroy: [00:06:20] Right, I do know sometimes people are more bullish once, and so sometimes the argument is when it gets too high, that means that everybody is finished buying and then that bullish and who’s left to buy from here. But anyway. Well well, thank you for that, Justin. That’s that’s great. And for those who are watching, I hope you took something from this. And as ever, if you have any questions or suggestions, please feel free to contact your PM and give that. Have a great weekend. Thank you

 

Justin Hahn: [00:06:47] Thanks everyone.

 

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on email
Email

Client impact

“Graduating from a big bank to Genus was one of the best financial steps we've ever taken. Genus has delivered reliable asset growth despite our moderate risk tolerance. As our financial security has grown, we've also been the beneficiaries of a great client experience. The company's communications have been consistently transparent and informative, including educational webinars and a well-designed web portal where we can track investments daily. Most importantly to us, our portfolio manager has always responded swiftly and thoroughly to our questions and requests. ”
Martin T.
"Having relatively diverse financial goals and needs, along with a slight reticence regarding the stock market, Genus skillfully addressed all of our concerns, and put together a truly exceptional plan: Fossil free funds and a diversified investment portfolio, check; An effective Impact investment portfolio that coincides with our hopes and dreams for a better world, check; Professional advice and assistance to create a donor advised charitable fund with immediate charitable receipts for tax purposes, check. Returns? Way beyond our expectations! We even had some fun along the way and certainly enjoyed an incredible two-year start to what will be a satisfying long-term relationship with Genus."
Marc B.
“I love the service I get at Genus.”
Chris H.
“Leslie and I were fellow board members when we met twenty years ago. For the last ten she has been thoughtful in the construction of an investment strategy for my family and is executing the strategy as planned. The team at Genus has met my expectations and are a pleasure to deal with.”
Bob Q.
“For over 15 years, I have provided selection and performance evaluation of multiple investment managers for a significant family office. Leslie and Genus have been foundational for me in my role. I have always found Leslie and her colleagues to be insightful and proactive, and found the performance of their portion of the portfolio to be well above benchmarks. And they have been a great pleasure to work with.”
Douglas H.
“Genus is a very innovative firm. I am pleased to invest in their Fossil Free and Impact strategies that help me invest in line with my values.”
Marnie C.
“Great team of professionals. Excellent website and reporting. Responds to inquiries promptly. Very pleased with the process of changing from another company to Genus as well. Kudos.”
David L.
“Genus consistently provides a good, clearly explained, comprehensive picture of the general economic and financial situation, along with an excellent account of the investment decisions made in relation to this. Genus’ equally strong concern with clients’ questions and requests for further information is also a very important part of the service it provides.”
Allan S.
“Back in 1992 when I found myself at fifty with a substantial amount of money to invest, I knew just one thing — that I didn’t want to contribute to tobacco companies, arms manufacturers, or oil. But over the ensuing years the options for socially responsible investing have become far more sophisticated and I’m very happy that this is a big part of the Genus approach. I also very much appreciate the long-term relationship with my portfolio manager, Mary Lou.”
Ann P.

As seen in

Are you ready to make an impact
with your investments
?