Market Watch – Sept. 28, 2018

Finally, global oil prices surged to their highest close in nearly four years on Monday after OPEC left production steady over the past weekend, reviving concerns that U.S. sanctions against Iran will lead to supply shortages. While prices fell Wednesday following reports that U.S. crude inventories were larger than expected, Thursday saw oil climb back above the $72 mark.

Markets

TSX Off Slightly, Nasdaq Notches Modest Gains

For the four days covered in this report, the Dow tumbled 304 points to close at 26,439, the S&P 500 shed 16 points to settle at 2,914, while the tech-heavy Nasdaq climbed 54 points to close at 8,041. In Canada, the TSX declined 20 points to end at 16,204.

Equities/Strategy

Strategy

With bond yields poised to move higher, our equity overweight recommendation remains intact, with a particular emphasis on U.S. stocks. We recognize Canadian, international, and emerging market equities have underperformed their U.S. counterparts year-to-date (YTD). While a mean-reversion opportunity appears to be materializing for short-term oriented investors, we advocate a more conservative approach and recommend tilting allocations toward U.S. equities given their higher earnings quality and growth profile. Equity investors have no shortage of worries, including the age of the current bull market, monetary policy tightening, global trade tensions, and pending U.S. midterm elections. However, our constructive equity outlook remains intact, supported by reasonable valuations, relatively low inflation by historical standards, low near-term recession risks, and robust EPS growth.

(Big Picture – Bill Curry)

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Market Watch – Sept. 28, 2018

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