Contrasting Worlds … (TWTW – Jan 31-Feb 4, 2022)

Contrasting Worlds – As someone presciently observed this past week – quoting them “approximately” – isn’t it something to watch MegaCap stocks trade in 2022 so far like Meme stocks traded in early 2021? Interesting indeed … and worth keeping in mind regarding the kind of environment we are now in (and may keep being in for a while longer yet …).

Anyways – quite the moves in recent weeks, whether from Netflix; Apple; Microsoft, and this past week, Meta; Google; and lastly Amazon … Oh, but wait, no not just AMZN, but also after the close Friday, Peloton, up over 20% on rumours AMZN might be on list of potential suitors. What’s to come Monday?

Elsewhere – well, the FED probably has never been more clear about raising rates comes March, BUT markets this past week got perhaps a tad more worried, given Friday’s Payroll data, that 50 bps might be a greater “possibility”.

Canada, well, interesting to note that aside from the Bank of Canada not raising rates until March either, the CAD is actually doing rather poorly, given one could otherwise reasonably expect it to benefit from the wind currently at the back of Oil prices (OPEC+ met, and maintained their commitment to 400K bpd, which they are apparently struggling to fill anyways … another story …).

and So our Loonie? at USD/CAD 1.15? NOPE 1.2760. I doubt we’re going back to mid-2008, but back then, the USD/CAD was … close to par 1:1 – yup, that’s right, but of course then, as Goldman Sachs ($GS) was talking about oil reaching USD200 per barrel, Oil peaked around USD178 (looking at the chart I could find) in June of that year. Fast forward of course to that year’s September, and what do we have? Well, September 15, 2008, a Monday, when Lehman Bros came out saying … ooohps, Wall Street, we’ve got a problem – which … well you know the story too well, plunged the world into the GFC. Oil, after that, well again looking at that chart, went to USD 55 by January of 2009. Course these were different times … but again, our Loonie is at 1.2760, never mind 1.15, or 1.00 … course for our Loonie, the higher the number, the worst it is, as the relationship here is the value of one USD expressed in CAD).

On another note – this one a political one – who would have thought that within days of #FreedomConvoy2022 in Canada, it would be the leader of the opposition, Erin O’Toole who would be gone as opposed to PM Justin Trudeau? and … could some of our Loonie weakness be the result of some judging our leadership here as rather “weak”? Can’t help but think that enters into the overall equation…

Technology – is where the fireworks keep firing. That got me thinking about volatility. And so I looked at the latest VIX number: 23.22, off 4.64% Friday, as markets regained their footing from the prior day’s session, which was all about red on the screens, as the META fallout dropped about 1/4 Trillion $ from the company’s market capitalization. Nasdaq Volatility: ended the week just above 27, having in late January hovered around 33 34 level. Bottom line – volatility still rather high … More risks ahead? Not to be discounted! Oh, BTW – back in October 2021, NASDAQ Vol was in the 15 area…

January – Earlier this week, I had a look at January in terms of both ETF flows and performance amongst Vanguard Canada’s offering of 37 ETFs => Click HERE!

I called it – Flows still bullish, performance more challenging (but probably should have use more challenged).

Talking of which, I would take note of the fact that Bloomberg’s Senior ETF Analyst Eric Balchunas has – as he put it – called it as far as Bond Funds causing the FED some problems going forward = > click HERE!

The gist of that? well, Bond Fund holders may not like to continue holding on to bonds as rates rise and losses pile up … THAT … Could be (come) a problem that might get the FED to rethink what’s to come in terms of hikes and QT.

FaceBook (Meta) – Covered at nauseam everywhere … so not much to add here, other than evidently in ETF land, that had an impact on the likes of FANG ETFs in particular, as well as Metaverse ETFs. Talking of the latter, I have two thoughts: 1) the company that came out with the first Metaverse ETF mid 2021 cashed out on the ticker = well done. Sure the Zuck paid a pretty penny to secure META as ticker. 2) possibly more immediately relevant: I don’t doubt that overtime, Metaverse is going to become “something” we probably won’t be able to get away from (even if … I am not quite sure I will be willing to “buy” virtual clothes lol … Anyways, what could be a worthwhile takeaway? perhaps that rather than going for the “new” Metaverse ETFs, you should want to first consider the Gaming ETFs, because after all, aren’t they already a long way further in that journey of getting all of us to go “Metaverse”?

Google – No problems with earnings there. 20:1 stock split = future inclusion into Dow Jones index …

Suncor – Apparently a miss on earnings, with stock price underperforming after that … BUT otherwise, with by the looks of it, ample cash flows to pay dividends, reduce debt, and continue to buyback stock (nice problems to have) …

Interest rates – apparently a 6 sigma move in European rates (from what I saw briefly on Twitter … Now, these kind of moves, as you and I can only guess, don’t happen very often. What I find most interesting overall, however, is that the Bank of England raised rates again this past week, while the ECB – apparently is committed to not raising them for some time to come … Boy, this ECB is no Bundesbank, that’s for sure …

Payroll data – In the US headline number blowing past expectations, and revisions to the upside = rising odds that 50 bps could be a thing in March (if I was a betting man, I’d say it still will be 25 bps – as Jerome will talk the talk, but not walk the walk imo). The FED – is going to let the market do their work for them, and then backtrack if the markets get too unhinged.

Peloton – After the Close yesterday, saw its stock rise 26% (from 24.60 close to USD 31.10) on rumours in the WSJ that the company was being looked at by names such as AMZN and NIKE. To me, this looks like a given as far as outcome, as the company stumbled horrifically in the past 18 or so months. And for behemoths like AMZN or NIKE, of course that would make sense as far as their initiatives, AND save them a lot of trouble (maybe) all the while getting them a “Brand” eventhough definitely tarnished amongst investors who got shewed up by either the treadmill, or bike …

Brian Belski – Latest update from BMO’s Brian Belski. The strategist reiterating his continued bullishness, all the while providing many nuanced remarks and comments well worth tuning into, in my opinion => Click HERE!

Jeremy Grantham – Course two weeks ago already, reiterated a rather stern warning he had for markets back in early 2021. Bubbles, Bubbles, Bubbles … in fact, SUPER BUBBLE: Worth a listen => click HERE! which I did, this past week. 60/40 portfolio according to Jeremy: ABSOLUTELY USELESS (take note!!!). We have an equity bubble, a housing bubble, elevated Commodity prices (which could go higher yet), and the lowest rates in the history of man …

Performance this past week:

Sectors

Noteworthy:

  • Energy and Materials still leading …

Themes

Noteworthy:

  • All themes bouncing back …
  • Travel – we seem to be seeing re-openings here there and everywhere … stocks this past week, at least as far as airlines and cruise liners – notably underperforming on Friday’s rebound …

Factors

Noteworthy:

  • Min Vol; Value; and Fundamental ahead of “Benchmark”

YTD Performance:

Sectors

Noteworthy:

  • Transition in picture: Energy, Financials; and Materials in the lead, Technology … at the opposite end of that spectrum. Shopify volatility recently … rather high.

Themes

Noteworthy:

  • still meaningfully negative YTD. Sectors are doing better, as are Factors …

Factors

Noteworthy:

  • Quality, Fundamental, and Value in the lead. THAT, and Dividends, I’d expect to continue to do better on a relative basis.

Other:

Have a great week-end 🙂