American markets today, Monday, viewed several hours before opening at 9:30 a.m. EST, appear poised to start strongly positive with the S&P500, Dow and Nasdaq firmly in green territory.
That follows Friday’s trading in which many stocks recovered to end higher as investors seemed able to sidestep rising COVID 19 numbers and nervousness about the Federal Reserve Bank’s plans.
Canadian markets look set to open positive with the TSX 60 also firmly in the green at time of writing.
European markets are open at time of writing with the CAC 40, FTSE 100 and DAX all firmly in the green
Amongst precious metals gold and silver are up.
Amongst currencies, the British pound sterling, Euro and Canadian dollar are all up against the American greenback. Although positive, the British pound looks somewhat shaky. “Last week was tough on the pound as UK data rolled over from the strong levels seen as the economy re-opened – it was always going to happen,”
explains Jeremy Thomson-Cook, Chief Economist at London-based payments company Equals Money.
“The crucial thing now remains whether more forward-looking data is also substantially weaker or continues to push forward at an elevated level. PMI (Purchasing Managers Index) sentiment numbers from the UK economy today should be able to answer that question,” he suggests. Continuing risks to the pound also include the Delta variant and supply chain problems such as a shortage of heavy-goods vehicle drivers.
Meanwhile the continued power of the greenback is slightly suspect this morning. “The dollar’s rally came to a bit of a halt on Friday and, finally, the Federal Reserve started to acknowledge the impact that the Delta variant of the Covid-19 virus is having,” Thomson-Cook says.
For the week coming up we can expect a continuation of contradictory forces at work. On the one hand we are being cheered by the recovery, the effect of the vaccines, re-opening of stores and offices and other activities. On the other hand, we are concerned about the Delta variant, supply constraints and the impact of normalization of demand following a recovery burst.
These factors and uncertainties mean that for some, this may be a good time to pause and reflect, suggests Paul Bates, a longtime market participant and lecturer McMaster University in Hamilton. This period could be a study time, he says. “We have hopefully experienced very robust returns in the 12 months just past. Right now, it is a good time to consider how the ‘macro’ is affecting the ‘micro’, (that is) our valuation parameters. It’s time for study and perhaps some recalibration.” he explains. “As my father told me frequently, ‘patience is a virtue.’”
Following Bates’ advice could mean holding off on any serious portfolio changes for a comfortable period.
Red-letter dates this week include Friday when Federal Reserve Bank Chair Jerome Powell speaks about the economic outlook at the Economic Policy Symposium in Jackson Hole, Wyoming. Undoubtedly, analysts will parse his every word, looking for clues about the Fed’s plans for tapering. “Any wavering from the calls for stimulus will prompt dollar losses although we have to be cautious as to how great they could be; if the Fed isn’t tightening then we should be concerned,” Thomson-Cook says.
Also in the red-letter category, this week, Canadian banks report third quarter earnings, possibly lower than last quarter but higher than a year ago, reflecting the recovery. The Bank of Montreal and the Bank of Nova Scotia report tomorrow, Tuesday, followed by the Royal Bank of Canada and National Bank of Canada on Wednesday and the Toronto Dominion Bank and Canadian Imperial Bank of Commerce on Thursday.
In previous editions of this column, I have suggested some issues and investments that merit consideration as we attempt to define the new normal.
Some investors may conclude that technological disruptors have a small place in their portfolios. Disruptor companies can add innovative new technologies or change and displace existing companies or industries.
In this category, Dan Ives, Managing Director of Equity Research at Wedbush Securities in New York highlights Matterport Inc., a 3D location scanning company, housing the largest spatial data library in the world Matterport’s network consists of 15 billion square feet that have been mapped out and digitized through its spatial data technology. It currently has 330,000 customers across various sectors including residential and commercial real estate in over 150 countries. Ives has a Buy rating and a $22.00 target price on the stock. It also has Buy ratings from Piper Sandler and Loop Capital Markets though with lower target prices at $18.00 and $20.00 respectively.
Generally, disruptor companies come with a level of risk and some of the technologies might require a PhD degree in engineering to grasp their potential. An exchanged-traded fund such as the Franklin Innovation Fund or the Blackrock Future Tech ETF** might be a suitable solution.
**This is not an investment recommendation, but a suggestion for further investigation.
Al Emid is a financial journalist broadcaster and author. His next book. The 2022 Emid Report on Volatility provides a map for navigating market tumult and is scheduled for release in January 2022.