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Quarterly Update

April 15, 2020

I have been fielding a few questions about the recent run in equities markets both here in Canada and in the US and I though it would be helpful to provide you an update and what are thoughts are. We are still slightly overweight US Equity across our models and more recently (March) trimmed some of this overweight. That said, we are still constructive on Equities and US Equities but we thought it would be prudent to take some profits at this point. I have attached a recent publication by Brian Belski, BMO Capital Markets Chief Investment Strategist. In Brian opinion, abnormally Bullish Sentiment and Y/Y Price Change Extremes Do Not Necessarily Represent Sell Signals. Please see the attached for his full write up which I think you will find interesting. His Keys Points are:
  • Bullish-to-Bearish Investor Sentiment Ratio Has Surged to Excessive Levels
    • Bullish sentiment has been subdued over the past year until recently when investor bullishness jumped to extremes
  • Probability of Gains is Lower After Bullish Sentiment Extremes, But Not By Much
    • S&P 500 registered positive returns in the 12 months following extreme bullish sentiment 72% of the time, compared to 75% following extreme bearish sentiment
  • Severe Market Losses Are Not Substantially More Prevalent After Abnormal Bullishness
    • Probability of 10%+ decline in the 12 months after abnormal bullishness is 19% versus a 12% chance after abnormal bearishness
  • Peaks in Y/Y Price Performance Could Bring Near-Term Choppiness Followed By Solid Longer-Term Gains
    • Price choppiness may occur in the three and six months post-peak with the S&P 500 posting average price returns of -2.9% and 1.0%,respectively
    • S&P 500 has averaged a 13.5% gain in the 12 months following such peaks with positive returns 100% of the time
 Also, I would like to invite you to two Client Events which are timely and informative.
  1. Client Webcast: 2021 Federal Budget Review
Tuesday, April 20 | 4:00 p.m. ET
On April 19, Finance Minister Chrystia Freeland will table the Federal Government’s first budget in more than two years. The budget is expected to provide a detailed account of pandemic spending, outline ongoing pandemic support for Canadian families and businesses and could include other significant tax measures. Join us for a live webcast moderated by John Waters, Vice-President, Director of Tax Consulting Services, BMO Private Wealth, and Dante Rossi, Director, Tax Planning, BMO Private Wealth, who will share their insights on the most significant personal and small business income tax measures announced in this year’s budget. An open Q&A will follow the discussion.
Replay link: 2021 Federal Budget Review
Deck: 2021 Federal Budget Review

  1. Client Presentation: The U.S. Economy and Financial Markets Featuring Experts From BMO Capital Markets
Thursday, April 22 | 4:00 p.m. ET
Are U.S. stock valuations stretched, or are they justified by historically low bond yields? Could the potential for higher inflation – which may result in higher bond yields – be the catalyst that drives investors from the stock market, or will equities continue their march upwards? To provide perspective, BMO Private Wealth is hosting a client presentation – available as either a WebEx or conference call.
  • The presentation will be moderated by Meghan Meger, Regional President, Prairies, BMO Private Wealth, and feature Michael Gregory, Deputy Chief Economist and Head of U.S. Economics, BMO Capital Markets, and Brian Belski, Chief Investment Strategist, BMO Capital Markets, who will share their insights on the U.S. economy and the markets.

Accessing the presentation
  1. Via WebEx
Click here to access the WebEx Event number: 129 694 7630
Event password: meet

  1. Via Call-In
English Presentation
  • Dial in numbers:
416-340-2217 / 1-800-806-5484
  • Participant passcode: 2481210#
French Presentation
  • Dial in numbers:
514-392-1587 / 1-800-898-3989
  • Participant passcode: 8712876#
English Playback – Available until May 22:
•   905-694-9451 / 1-800-408-3053
•   Passcode: 7680739#
French Playback – Available until May 22:
•   514-861-2272 / 1-800-408-3053
•   Passcode: 7315263#