Keith Richards, president and chief portfolio manager, ValueTrend Wealth Management

FOCUS: Technical analysis 

MARKET OUTLOOK:

Major indices have crossed through their 2000-day moving averages. That’s the good news. However, the indices (SPX, TSX) are struggling to break their last peak and trough patterns. This implies that the bottom of the recent bear market is yet to be confirmed.

The U.S. Federal Reserve and Bank of Canada must maintain a tight policy until inflation gets down to its historic norms. That’s three per cent (forget the two per cent fantasy) – which is still nearly half of where we are now. The pain cycle must continue. Adding to the money supply is counterproductive to invoking the pain cycle to reduce inflation.

Tightening will slow spending, which slows the economy and causes consumer distress. This pain, in turn, fights inflation. It’s next to impossible not to allow the pain cycle to work its intentions and achieve the desired results of fighting inflation. Invoking the pain cycle is the point of the exercise.

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TOP PICKS:

Keyera (KEY TSX)

We like the oil space – and KEY – which is a pipeline - has a low beta profile with a six per cent dividend while we wait for energy stocks to break out. Seasonally energy can do well from February to May. The liquids transportation and storage business will benefit from entering more long-term contracts, which will provide steady predictable cash flows. Acquisition of further interest in Keyera Fort Saskatchewan finalized, expect to provide focus going forward.

BMO Base Metals ETF (ZMT TSX)

We like the materials and metals space – ZMT is kissing the neckline where it broke out from a  bottom formation recently. Good place to buy. Seasonally materials can do well from now until May. Allows a passive, diversified exposure to approximately 30 base metal names. Copper, aluminum, iron ore, uranium, and specialty metals. 

FirstService (FSV TSX)

FirstService broke out from a bottom formation. Pulling back to its neckline. The company operates in property services throughout North America. In a potential recessionary environment believe it will be less impacted. The branded segment especially should be able to deliver continued growth. 

PAST PICKS: December 19, 2022

Cash - we are still about ¼ cash—markets have not signalled a true bear market bottom

Barrick Gold (ABX TSX)

• Then: $22.58
• Now: $22.37
• Return: -1%
• Total Return: -0.3%

Nutrien (NTR TSX)

• Then: $99.49
• Now: $110.39
• Return: 11%
• Total Return: 12%

Total Return Average: 6%