Darren Sissons' Top Picks: February 11, 2022
BNN Bloomberg
Top picks from Darren Sissons, vice-president and partner, Campbell, Lee & Ross
MARKET OUTLOOK:
Central bank policy errors remain a key risk for the markets. To hedge that risk, Jerome Powell, the chairman of the U.S. Federal Reserve, is on record noting a 50bps interest rate rise is likely in March 2022.
We, however, believe the 50bps positioning is marketing and sets the stage for minimal market pushback should a 25bps raise in March ultimately be executed. The Bank of Canada is likely to follow a U.S.-led rate rise. We do not see it acting independently of U.S. central bank policies.
The threat of higher interest rates has been a catalyst for market rotation. COVID success stories and meme stocks, in particular, saw large declines since peaking in early 2021. Should interest rates rise as expected, further downside for those stocks is likely.
Value stocks and financials have been beneficiaries of the threat of higher interest rates and should continue to benefit if rates do rise. COVID recovery trades including energy, as mentioned in prior appearances, should also provide leadership moving forward.
The BoC under Tiff Macklem’s leadership has exercised impactful moral suasion despite limited execution. Market participants believed the tough talk on rates and did not punish the Canadian dollar for the January failure-to-launch rate rise.
