Top picks from Colin Cieszynski, chief market strategist, SIA Wealth Management
Colin Cieszynski, chief market strategist at SIA Wealth Management, discusses his outlook for the markets.August to October has historically been the weakest and most volatile time of the year for equities, and this year appears to be following the usual pattern. Stocks rallied in early July, but in the last few days they have turned decisively downward for a number of reasons.
First, the reaction to earnings season has been neutral to negative. Although a few stocks have rallied on positive surprises, the majority of companies have not moved or have sold off, capped off by last week’s 20 per cent-plus post-earnings plunge by Intel. We are now past the peak of earnings season in the U.S. and Canadian earnings peak over the next ten days except for U.S. retailers and Canadian banks later this month.
Political uncertainty and strife have increased significantly over the last several weeks. In addition to the U.S. election campaign heating up, political strife has ramped up in Europe and the Middle East to the point where it has become hard for traders to ignore the risks of upheaval. Signs of a crumbling global economy have been growing for some time. China has been struggling for months, while two interest rate cuts from the Bank of Canada have confirmed a softening economy. Last week, confidence in the U.S. economy – one of the last big dominoes still standing – started to crumble following a string of disappointing employment reports.
Meanwhile, signs of eroding investor confidence and increasing fear have emerged in several places. The VIX Volatility Index has spiked upward, and the price of gold has held steady following recent selling. Even the Japanese yen appears to have regained its status as a haven for capital after several years on the outs after the Bank of Japan raised its benchmark interest rate back above zero.
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