On November 2, Bruce Campbell joined BNN's Market Call for a discussion about market performance for Q4 2017.
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The Fall quarter of 2017 has started well for Canadian markets. The underperformance of the TSX vs the S&P has been narrowing and the past few weeks have shown stronger growth.
The Canadian market has been lead higher by the usual suspects in the first half of this last quarter of the year. Financial shares and the energy sector have both played their parts. Energy has been helped significantly by higher oil prices, with West Texas Crude oil hitting $55 US a barrel. Energy has rebounded from the very over sold levels see this past summer and will take further direction from either continued strength from oil prices or a softening in prices if supply accelerates.
Gas stocks have been a bit of a different story however. Unseasonably warm temperates throughout North America have resulted in much muted demand for gas to heat homes and businesses.
Canadian banks, which are the stalwarts of many Canadians portfolios, have shown strong results to begin the fourth quarter of the year. There are a number of factors that have helped these shares along, but strong third quarter earnings numbers kicked off the gains. This was followed by a reduction in the angst surrounding talk of a real estate bubble that seemed to have been developing. Government intervention in both the Vancouver and Toronto markets seems to have tempered the highly speculative nature of those markets for now and bank shares have benefited from these actions. Dividend increases at some of the banks also created a positive environment for shares of these companies.
Banks weren’t the only shares to show strength in the financial sector early in this quarter. Insurers, who have lagged banks, mainly due to the low interest rate environment, have started to appreciate as the Bank of Canada increased rate twice in the past few months.
Bruce also cautioned that markets are no longer cheap, but explained that there are few alternatives for investment funds at this time. Stock market multiples are now in the high teens based on next years earnings, which certainly isn’t cheap. A case can be made, however, for markets moving higher in 2018. Global growth continues to look positive. That, in combination with seasonal trends and earnings momentum may influence markets in a positive manner through the rest of 2017 and beyond.
Campbell Lee & Ross' Top Picks
Bruce's stock picks, as mentioned in this BNN segment included top picks: Manulife, SNC-Lavalin, Alimenation Couche-Tard.