Markets Equity markets continue to ride the wave of excitement over some select AI related companies and with hopes of rate cuts soon this was enough to see most North American equity index reach new record highs before reversing by week’s end. The DOW closed the week lower by 0.9%, Nasdaq dropped 0.9% and the TSX bucked the slide and finished the week higher by 0.9%. |
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US Fed Chairman Jerome Powell was a little more dovish in his remarks to Congress and energized the bulls and allowed the risk trade to continue it’s march higher.
Financials Interest rates are trending lower on expectations of an upcoming rate cut. While it’s still to early to state with any certainty when bank rates will be lowered, investors seem very resigned to the fact that the next move in rates will be to the downside. All that seems left to learn is when. With that outlook in mind, it should be generally positive for equities and risk assets provided that the economy doesn’t fall off a cliff. So far, no cliff in sight. The US 10-year treasury yield is testing the 4.0% level again and a break below this level likely invigorates the bulls even more. |
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North of the border, the bank of Canada decided to hold their bank rate steady. This was little surprise to anyone paying attention. With out a decisive move or more dovish comment from the US Fed, the BOC is not likely to move until the US does or unless the wheels fall off faster for the Canadian economy. This past week’s Canadian jobs data came in a bit hotter than expected but when you take a deeper look at the numbers you find that the gains in employment in Canada was almost all due to public sector (govt) hiring while private sector employment shrank. This increase in employed still was not enough to outweigh population growth and resulted in an increase in the unemployment rate. Once again, as I’ve stated before, if you look at the data on a per capita basis you can see that the Canadian economy is slowing quite rapidly and it’s inevitable that Canadian interest rates will need to be lowered sooner rather than later.
And Canadian bond yields are telegraphing this weakness with the 5-year bond yield well back below 3.50%. We should begin to see mortgage rates back on the way down in Canada. |
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Another thing to keep an eye on is the weakness in the US dollar. This is another indicator that risk on assets are in vogue and fear is in little supply right now… |
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Commodities
WTI oil prices were slightly lower by the end of the week. Let’s blame it on rising US inventories for now. WTI oil closed the week at $78.11 down roughly a dollar per barrel. |
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Once again gold is the star commodity of the week with an ounce of gold reaching all time record highs in US dollars. Gold briefly pierced $2200 per ounce on Friday and has climbed almost $150 per ounce over the past 7 trading sessions. Higher gold prices are also signalling a return to risk assets and a likely drop in US interest rates. |
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Stocks With a more dovish tone from the US Fed this week that was all that was needed to keep a firm tone to equities. We saw a bit of a reversal in the indexes on Friday with a lot of that due to a reversal in Nvidia (NVDA) and some related high flying tech stocks.
The parabolic move in shares of the AI chip maker was long overdue for at least a breather. Including aftermarket trading, NVDA witnessed a $122 swing in price or roughly a $305 billion (with a B) swing in market value or roughly the total market capitalization of IBM and Boeing…. combined! |
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Parabolic moves like this scare me. More times than not they mark long term tops in share price. This stock and those that have ridden the AI wave have been very large continutors to this bull market. If the bull market in this sector wanes we may just have to rely on old school boring businesses to carry the markets higher. |
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We’ve finally been seeing some decent pullbacks on some our favorite names. A bit more fear in the markets, something I’ve been waiting to see for quite some time now, should be welcomed and will make for better buying opportunities. We need to see some healthy pullbacks to scare enough investors and take some of the excesses out of some high-flyer's.
Apart from some of the big tech names, that have had massive runs, the rest of the market feels like it’s a Goldilocks type of environment, not too hot and not too cold. The US economy, the engine of the global economy, continues to hum nicely, not too hot to cause a bump up in inflation and not too cold to turn recessionary. It seems very clear to most investors that rates will be coming down, it’s just a matter of when. Investors, right now, seem to have little cause for concern.
Or did I speak too soon…. |
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It’s said that bull markets climb a wall of worry. When we see headlines like these it’s usually a sign that the majority believe it’s clear sailing and markets will only go higher. How many times have we seen headlines like this coincide with market tops? It always pays to be a bit fearful when others are greedy and vice versa.
Back to microcap land….
We saw new highs this week in Kraken Robotics (PNG.T), Firan Technologies (FTG.T), Nova Cannabis (NOVC.T), Gatekeeper Systems (GSI.V), and Ztest Electronics (ZTE.V). Two new names on our watch list, Haivision Systems (HAI.T,) who we interviewed this past week, and Tantalus Systems (GRID.T) also made new 52 week highs this week. |
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We saw some decent pullbacks, and in our opinion buying opportunities, on a number of favorite names. Thermal Energy (TMG.V) and Biorem (BRM.V) came back into our buying range. I managed to add a bit more TMG.V and will look to add to BRM.V if the opportunity continues to present itself this week around $1.40. |
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I’ve also got my eyes on CanadaBis Capital (CANB.V) and BeWhere Holdings (BEW.V) to possibly add this week. CANB.V has managed to bounce a few times off the $0.21-$0.22 level. |
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BEW.V on the other hand looks poised to break out, especially now that all the old warrant overhang is gone. |
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The company has been pretty aggressively buying back stock these past few weeks in the $0.28-$0.30 range. |
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And ImmunoPrecise Antibody (IPA) shareholders saw some wild action this week. On Thursday the stock saw over 26 million shares of trading volume and at one point the stock was up 50% before sliding back to finish the day up 14.5%. The company will be reporting quarterly financial results this coming week and all eyes will be on the company’s cash burn rate to see if/when the company may need to go back to the equity markets for funds. |
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It will be a lighter week for me this week as I’m off to Mexico City to meet the extended team at Ola Media. I’ll report back with pictures and updates as I can.
To your wealth, Paul and Trevor |
