Stan Wong's Top Picks: April 1, 2022
BNN Bloomberg
Top picks from Stan Wong, portfolio manager at Scotia Wealth Management
Stan Wong, portfolio manager at Scotia Wealth Management FOCUS: North American large caps and ETFs
MARKET OUTLOOK:
After falling nearly 15 per cent to start the year, market volatility has eased somewhat, and the S&P 500 Index has bounced nine per cent higher in the past 2 weeks. Here in Canada, the TSX has faired better year-to-date with its heavier weighting (over 29 per cent) in energy and materials stocks.
Of note, the rising interest rate environment is compelling prudent investors to reassess their weightings in long-duration assets and higher multiple stocks, particularly names in the information technology sector. The S&P 500 Information Technology Index currently trades at nearly 7x price-to-sales, a multiple last seen in March 2000 before the technology index slid 82 per cent over the next two years.
Another consideration is that the S&P 500 technology sector has outpaced the broader S&P 500 Index in each of the past eight calendar years. As such, the rationale of mean reversion tells us that further outperformance seems improbable.
We continue to believe that in the absence of an imminent recession (or black swan event), a sustained equity bear market is unlikely to materialize. From our view, the global economy should continue to rebuild and reopen from the aftermath of the pandemic, producing constructive economic data. While economic growth may be somewhat dampened due to the effects of rising interest rates, inflation and geopolitical pressures, an economic contraction seems unlikely in our view.
