Once again volatility was the best way to describe the week in the markets. The much-anticipated FOMC meeting this past week resulted in the US Fed preparing markets for a March increase in rates. This would be the first time US rates have been raised since 2018. US markets did hold on to a solid rally on Friday afternoon – with the S&P ending the week up around 0.8% – Nasdaq was up 3.1% on Friday and ended the week unchanged.

Canadian markets followed the US side with the TSX up 0.6% on the week driven mostly by the oil sector. To the surprise of some, the Bank of Canada decided to hold the bank rate steady. The TSX 52-week highs list, this week, was dominated once again by energy companies while the 52-week low list was mostly made up of life science and precious metals companies. To highlight how bad the life science sector has been, the US biotech sector has now reached record level under-performance to the S&P on a rolling 12-month basis having underperformed by roughly 60%.

Oil and gas continues to be one of the better performing areas of the market. WTI is selling in the high $80's per barrel and natural gas prices had a strong week after futures soared over 70% during the last half hour of trade on Thursday and closed up 46% for their highest daily percentage gains on record. We believe continued strength in the oil and gas will accelerate demand for companies that service the sector, and we are actively looking for investing ideas in that space. Stay tuned.

We continue to believe that sector rotation is being dominated by institutional money and some of the once hot areas like tech and life sciences continue to be driven by heavy fund redemption. A case in point, is disruption investor Cathie Wood's ETF, ARK Innovation (ticker: ARKK). As of the open of trading on Monday, ARKK was down nearly 55% from its 52-week high and down 22% so far in 2022. That compares to the Nasdaq Composite, which is down 14% from its 52-week high and 11% in 2021. Many traders are selling the stocks in her portfolio, possibly forcing her to sell as well, leading to ETF redemptions and creating a downward spiral. There's even an "anti-ark" ETF called Tuttle Capital Short Innovation (Ticker: SARK). SARK does well when ARKK shares decline by using swap contracts to short the fund. SARK was listed to trade on Nov 9, 2021, less than 3 months ago, and has rocketed 64.5% in that time frame.

We bring this up to highlight that institutional fund rotations, we believe, are causing much of the recent volatility. The smaller, less institutionally owned microcaps are dancing to their own music and have been considerably more stable of late. We continue to believe that good opportunities exist in the lesser known, lesser followed microcaps that show good revenue and earnings growth.

Pioneering Technology (TSX.V: PTE) Price - $0.045 Market Cap - $2.5M

Aequus Pharmaceuticals (TSX.V: AQS) Price - $0.105 Market Cap - $14M