The following are recent comments from NOAH BLACKSTEIN (manager of the Dynamic Power Global and Alpha Performance Fund)
Up until this week there have been two notable sources of frustration in December. The first source of frustration was the steady climb of the Canadian dollar in December. While oil prices were somewhat of a tailwind for the Canadian dollar, it was the only global currency to appreciate versus the US dollar since the election. My bearishness on the Canadian dollar is based on the US-Canada interest rate spreads which are at levels that are associated with a Canadian dollar closer to the 1.40-1.45 range we reached earlier this year. Since the Fed meeting this week the Canadian dollar has started to selloff. I view the US dollar as a source of returns for Canadian investors.
The second source has been the unprecedented rally in value stocks (+14%) versus growth stocks (-3%) this quarter. Seventy-five percent of the move in the market since the election has been from financials with the balance coming from energy and cyclicals. Banks and cyclicals were undervalued but much of that undervaluation has now been closed by the 25%-50% moves over the past month. I believe much of this is due to closet indexers rushing to cover underweights. In cyclicals, Caterpillar which traded at 12x earnings in January now trades at nearly 30x earnings. I am fully aware that 30x earnings is reflective of optimism on President-elect Trump’s plans but the stock has gone from a "value" investment to a "hope" trade. Hope is a terrible investment strategy. In the meantime the selloff of growth stocks means we own many 20%+ growers now trading at 15x earnings. My optimism is much like my opportunities – high.
SUGGESTIONS (by Dan):
Age up to 60 (and not retired)… consider switching from Dynamic Power Global Balanced to Power Global (increases exposure to equities which have fallen over last 3 months.)
The views expressed do not necessarily reflect the opinion of Argosy Securities Inc. This does not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. Please consult a professional before making an investment decision.