Hawkish Talk … Dovish Walk … (TWTW – Jan 24-28, 2022)

Another week of heightened volatility and uncertainty, with, at the end of it all, some calm seemingly returning, with for instance Volatility dropping back; and Gold giving back most of its recent gains.

The old saying “it ain’t over till the fat lady sings” however comes to mind … somehow, despite January having kicked off the year as the worst start of the year since … what is it? since 2008? since … EVER? Whatever. Point is … somehow it is hard to think/feel like this is IT, as far as where we definitely can say we’ve seen the bottom of this correction, which according to some goes back to Feb 2021, and for others, certainly to November 2021.

So … I guess the trick remains to figure out how to position in this year of transition … transition as in, fingers crossed, overall economic reopening, as opposed to transition as in transitory inflation. But transition also not just re: reopening, but also in terms of impact of higher rates on the markets overall, and ramifications of ultimate balance sheet deleveraging on the part of the FED, which itself is another story altogether.

The point is: markets have demonstrated a very high degree of sensitivity to rate movements, + participants are keenly concerned about that FED balance sheet unwinding – aka significant withdrawal of liquidity for markets … which … well, markets have thrived for some time on that potent combo of zero rates, and endless liquidity. Having to give up that addiction is, as we are witnessing, not exactly something market participants look to be able to do without suffering a significant case of “the nerves”.

This week in Sectors Land:

Key takeaways:

  • Energy and Financials still leading overall
  • Consumer Staples – benefiting? from some looking to play defence
  • Technology – backdrop wrapping up the week one where Apple earnings provided support for a bounce
  • Overall Canadian market up on a week that was very volatile, with violent moves both downward and upward

This past week in Thematic Land:

Key takeaways:

  • interesting to note that “themes” all in the red even as broader market regaining its footing somewhat
  • As at week’s end, ARK is apparently buying back into TESLA, which of course of late has been pulling back as well … Some folks observing that Elon timed his sales well recently …
  • For me, perhaps one of the most noteworthy relative performance developments is that while Energy is flying high and leading at the moment, Clean Energy has been pulling back rather sharply … Aside from rich valuations getting wrung out of this market overall, I can’t help but think that the relative performance picture between these two is … well, connected.

and for good measure, this past week in Factors Land:

Key takeways:

  • The key takeaway for me from the above is that Fundamental (value derivative … if I can put it that way) and Value are continuing to lead, while Minimum volatility is doing what it is supposed to (less downside participation in exchange for not insisting on full upside participation), and Dividends … well, dividends are going to remain well bid, imo for some time (which isn’t to say that at times they cant and won’t underperform).

Value, by the way: GREAT interview with Kim Shannon by Pierre Daillie => Listen in HERE!

Events – topical: Upcoming webinar by Bompton Group => click HERE!

Fundata A+ Awards => Click HERE! Congratulations to all the winners 🙂

Crisis in the Ukraine … Could turn into a total disaster, of course… high stakes poker. In the meantime, underscores European vulnerability particularly in relation to Energy … 2022 Energy Crisis?

BoC – The bank of Canada’s Tiff Macklem unequivocally signalled that a significant change was happening with interest rates going forward, and the BoC committed to bringing inflation back under control at its 2% target level. He did so by … not raising rates … not even a 25 bps which … Central banks in N-Am being late to do something about it … well, would have been a good way to get started. Why didn’t he? Who knows … Other than perhaps a way to show that no matter the backdrop – a Central banker will do what a Central banker will do …

FED and rates – US FED similarly on Wednesday didn’t raise rates, all the while leaving markets on edge, resulting in participants anticipating perhaps one more hike than earlier expected. That … and, of course, oh well, there is this balance sheet reduction issue sure to continue to rattle many …

Bottom line of all of this: Rate hikes have been pre press released. When they start to rise in March, nobody will be able to say – hey where is that coming from …

Tesla – The future of the company is … robots (ok apparently a priority this year). Meantime, the Pick up truck is being delayed, and I don’t know that I have seen what’s happening with the super trucks (?). Man it would have been cool to have one of those go to Ottawa … Come to think of it, that would have been a great PR coup on the part of the company to have joined the across Canada Convoy …  but aside from a tweet saying something along the lines of Canadian truckers rule … nothing out of Elon on that front, unless I missed it.

Microsoft – Company reported strong results and headed higher post results … having hit a low of $280.23 on Monday, the company wrapped up the week with the stock at $308.26 (or + 10% or so from the low … a nice pop if you had the fortitude to buy on Monday, when everyone was still freaking out about that two day FOMC meeting on Tuesday and Wednesday …)

Apple – reported record revenues and earnings (apparently in spite of supply chain issues, which this time around weren’t quantified in $ terms), with stock popping up nicely thereafter, and retaining the pop into the close on Friday. (unlike other cos, who in recent past had an initial pop out of their earnings release, only to give up gains relatively quickly …). Perhaps particularly noteworthy – the company regained #1 status on smart phones front in China.

Netflix – Got taken to the woodshed after talking down expectations for sub growth going forward. Coming out of this after stock got clocked, dropping some 25% promptly, someone I guess waiting by the woodshed – a certain Bill Ackman (of former CP Rail fame in Canada 🙂 ) – picked up a sizable chunk of the company’s stock … Interesting …

Oil – well, it seems $100 is within reasonable reach, given, amongst other things, that OPEC seems to have a hard time meeting their increased quotas commitments, and demand … continues to increase, which presumably full 2022 reopening will only boost further. For Eric Nuttall’s latest update => click HERE! Thank you Eric!

CN Rail – New CEO, who has already stated that she will take French classes! => click HERE! Congratulations!

Truck Convoy in Canada – it takes a lot to upset Canadians. “Our” Liberal “Leader” and PM Justin Trudeau seems to have succeeded …

Pray that everything goes well in Ottawa, and that everyone is safe, as warm as can be in -20 or even below level … And that rather than a PM continually talking down to Canadians, we can have a more responsive, and accountable leadership for this beautiful country.

Bitcoin – is it just me? or has the chorus of cheerleading on the crypto currency been a tad more quiet of late? Guess the store of value, respectively liquid gold side of the argument or thesis has perhaps died down a tad with the rather sharp drop experienced since November … My best guess? it will come back … although some are likely losing their speculative “nerves” in the context of everything unfolding in markets since November in particular …

Other:

oh, and Some pics I came across that I liked, respectively why I am including them here:

 

Tooth paste ESG related questions: a) what is the most ecologically friendly lid? b) does the colour make a difference?

Canada growth versus Value – interesting the advantage growth has had for some time has essentially vanished, respectively value has made up a chunk of the ground it was lagging by. Incidentally, the article from the Globe that I got this from => >Click HERE!

Volatility last week – volatile, but calming down toward week’s end. Renewed volatility next week?

Inflation in Canada (from Mark Seed – my own Advisor => click HERE!)  

4.8% … ouch … on the plus side … I guess that picture suggests that if history holds, it should come back down …

Canada versus US – something Kim Shannon from Sionna Investments talks about with Pierre Daillie (link above) – Canada is cheaper than the US by quite a margin (I think Kim said 15 vs 21 P/E) …

Bonds and Inflation (from BMO) – equity markets are fussing quite a bit of late (you’ve noticed lol) … BUT bonds … are overall taking it in strides atm with their takeaway being – I guess – don’t fuss about inflation (or presumably about rising rates … )

And Eric Balchunas – interesting to note that factors are doing well … considering Thematics last year arguably took a lot of flows that could have gone factors … and that thematics are currently not exactly a place people are perhaps enjoying as much as they did last year … could 2022 be when Smart Beta returns?

Have a great week-end! Happy to see the sun shining out there, even if accompanied by rather frigid temperatures.