Colin Cieszynski, chief market strategist, SIA Wealth Management

Focus: Technical analysis, Canadian, U.S. stocks 

MARKET OUTLOOK:

North American markets have continued to rally into June, with the S&P 500 Index and the Nasdaq Composite reaching new all-time highs as recently as this week. There have been growing concerns that this rally may be getting tired and potentially due for a pause.

In recent weeks, much of the gains have been concentrated in a small number of stocks, particularly in the semiconductor sector. The Dow Jones Industrial Average, which reached 40,000 a few weeks ago, dropped back and stalled out. The Dow Transports did not confirm the recent new highs and has actually rejected them and has shown signs of breaking down lately. Similarly, the U.S. small-cap Russell 2000 Index has been struggling and European markets have turned downward in the last week. Additionally, we have entered the historically seasonally weaker time of the year for equity markets, which runs through to mid-October.

Signs of stagflation, a period of high inflation and slow economic growth, remain in North America and because of this, central banks, which have been running similar policies for several years now, have started to diverge. The Bank of Canada and European Central Bank cut interest rates this month, while central banks in the U.S., U.K. and Australia did not. This battle back and forth between inflation and the economy may impact investor sentiment through the summer along with election campaigns in Europe and the U.S., plus ongoing political tensions in several parts of the world. 

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TOP PICKS:

APPLE (AAPL NASD)

AAPL has been climbing in relative strength rankings for the last six weeks and recently re-entered the favored zone in the SIA relative strength reports. AAPL may be benefitting from capital rotation within the “Magnificent Seven” stocks and recently broke out to a new high.

GENERAL MOTORS (GM NYSE)

GM had been an underperformer through 2022 and 2023 but its relative strength has picked up since the start of this year and it re-entered the favored zone in SIA relative strength reports for the first time since early 2022. The stock broke out of a downtrend back in March and has continued to recover.

DOLLARAMA (DOL TSX)

DOL.TO continues to be one of the highest ranked stocks in SIA relative strength reports. Discount retailers such as Dollarama have been attracting interest from investors relative to broadline and specialty retailers during a time when consumer have been getting squeezed by rising prices.

PAST PICKS: March 22, 2024

Nvidia (NVDA NASD) 

• Then: US$942.89
• Now: US$139.32
• Return: 48%
• Total Return 48%

Athabasca Oil (ATH TSX)

• Then: $5.25
• Now: $4.95
• Return: -6%
• Total Return -6%

Eli Lilly (LLY NYSE)

• Then: US$770.61
• Now: US$891.46
• Return: %16
• Total Return 16%

Total Return Average: 19%