Brooke Thackray, research analyst at Horizons ETF Management Canada

Focus: Seasonal investing and technical analysis

Market outlook:

2023 will be known as the year of “no recession,” despite pundits calling for one. Several indicators were showing weak economic growth, but the gross domestic product (GDP) has remained positive in the U.S. and unemployment has remained low. In Canada, the unemployment rate is still below the historic norm. Excess savings from government stimulus during COVID-19 and governments running huge debts have kept the economy alive. In the U.S., the excess savings is running out. Governments are continuing with large deficits, but their actions are having a reduced effect on the economy. The conditions for the stock market look moderately favourable over the next few months as government spending is expected to continue to support the economy.

2024 is a U.S. election year. If the stock market were to follow its seasonal trend, large gains are not expected until late in the year.

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Top picks:

Horizons S&P 500 Index ETF (HXS TSX)

The S&P 500 is close to all-time highs and in its favourable seasonal six-month period. At this time, the S&P 500 is favourable over the S&P/TSX Composite Index. This could change, especially if both the energy stocks and Canadian banks perform strongly. For now, the momentum is with the S&P 500.

Materials Select Sector SPDR Fund (XLB NYSEARCA)

The materials sector has a strong period of seasonality from Jan. 23 to May 5. The sector in the U.S. is approximately 70 per cent chemical stocks. The economy in the U.S. is still stable and growing and as a result, the materials sector should be a beneficiary.

Snap-on Incorporated (SNA NYSE)

Snap-on has a strong seasonal period from Jan. 24 to May 5. Snap-on makes tools and instruments for car repairs. The average age of cars on the road has been increasing and cars are becoming more complex. Both of these trends are favourable for Snap-on. If the economy slows further, expect consumers to hang on to their cars longer, needing more repairs and servicing. This should benefit Snap-on.

Past picks: October 31, 2023

Industrial Select Sector SPDR Fund (XLI NYSEARCA)

Then: $98.36
Now: $111.29
Return: 13 per cent
Total Return: 14 per cent

SPDR Gold MiniShares Trust (GLDM NYSEARCA)

Then: $39.37
Now: $40.18
Return: 2 per cent
Total Return: 2 per cent

Horizons Equal Weight Canada Banks Index ETF (HEWB TSX)

Then: $25.88
Now: $30.20
Return: 17 per cent
Total Return: 17 per cent

Total Return Average: 11 per cent