Investors Flee to Europe, While Canada Remains Undervalued
Written by Cameron Scrivens & Kai Lam
Regions in Focus
Canada:
Latest inflation print shows consumer prices peaking, on a firm downtrend
Bank of Canada pausing rate hikes through Q2, leaving overnight
rate at 4.5%From a market standpoint, Canada still seems undervalued
U.S.:
Big technology mega-cap companies are announcing redundancies, supportive for stocks
Q4 earnings season (underway) will provide critical feedback on recession risk
Higher markets for now, but neutral on deploying more cash
International:
European indices and stocks remain cheap
EU energy concerns are abating; economic resilience has been better than expected
Fund flows back into European stocks is expected to continue
Market Watch
What we’re overweight: European equities
European stocks have rallied since October, benefiting from easing concern over energy supplies and fears of a deep, war-induced recession. Both concerns, it turns out, were overblown. We expect EU stocks with high EM exposure to gain from China’s recovery this year.
What we’re underweight: U.S. dollar
With the spectre of U.S. recession in the air, and the international backdrop improving fast, last year’s strong rally in the greenback has lost steam—a trend that will continue. We’ve converted a portion of our cash position back into CAD as a result.
| Company or issue | Buy, Sell, Hold | Thesis |
|---|---|---|
| Telus Corp. (T: TO) |
Buy | Sector undervalued, replaces SJR.B in our holdings |
| Schneider Electric SE (SU: PA) |
Hold | Fast-growing China segment to gain from re-opening |
| Pfizer Inc. (PEE: NYSE) |
Sell | M&A and execution risk to company's balance sheet |
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