I have updated the stock and ETF portfolios on the website.
It was another hard down week in North American markets, although we did close the week with a strong rally on Friday. That being said, our mining stocks finally succumbed to the selling pressure and on Friday I sold Agnico Eagle and Endeavour Mining to reduce risk in that sector. Typically when the strongest performers start to sell off we are close to an investable bottom but for now the goal is to preserve capital for reinvestment once a bottom is in place. As I mentioned on Friday I am still interested in Nutrien, Cameco, and the strongest precious metals stocks. We will continue to be defensive for the time being but will also be ready to buy when an opportunity presents itself.
Looking at the markets in general we can see that the S&P 500 is following the bear market path that I outlined several weeks ago (lower highs and lower lows) and is now due for a bounce.
On Friday the index made a hard reversal and looks ready for a relief rally. The weekly stochastic indicator is approaching oversold and market sentiment is extremely bearish (contrary bullish). There is always a possibility of further selling to start the week but after six down weeks in a row the stage is set for a rally.
The TSX has been stronger than US indexes due to it being a commodity based index, which tends to do well in an inflationary environment. However, we can see now that it is also starting to break down with the exception being oil related stocks, consumer staples and utilities (we own several).
The TSX has now made a lower low but like other North American indexes it also put in a reversal on Friday.
For now we are seeing a battle between the inflationary forces of previous accomodative monetary policy and the current deflationary policy being pursued by central banks (i.e raising interest rates). For now I favour the deflationary outcome for stocks until we see central banks reverse course. That being said, inflation is also being stoked by international sanctions and supply chain restrictions resulting from the war in Ukraine as well as ongoing Covid (and Covid policy).
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