The Living Market Podcast

The longest inverted yield curve in history is finally coming to an end, says Ashish Utarid, Assistant Vice-President, Investment Strategy at IG Wealth Management. An inverted yield curve is when long-term bonds have lower yields than short-term bonds (an unnatural situation, given that long-term bonds are riskier and therefore typically provide a higher return). Ashish explains what the end of an inverted yield curve has historically meant for the markets and whether it could signal an upcoming recession.

The U.S. Federal Reserve (the Fed) needs to tread carefully with any upcoming rate cuts, says IG Wealth Management’s Chief Investment Strategist, Philip Petursson. Many financial commentators are expecting a significant cut (of 50 basis points) because of weakening economic data and a more volatile market. However, Philip asks, will a large rate cut have the right effect? He argues that it’s not the Fed’s job to soothe the markets and that we should keep rate cut expectations real.

Berkshire Hathaway, the investment company run by Warren Buffet, recently hit the $1-trillion-value mark, says IG Wealth Management’s Chief Investment Strategist, Philip Petursson. Since 1987, Buffet’s company has returned an average of 16.7% annually, considerably more than the S&P 500’s average return of around 11% over the same period. Philip explains why the company often performs well when markets are down and why his team’s tactical tilts are mirroring those of Berkshire Hathaway; cutting stakes in equities and boosting the fixed income portion.

What drives one stock index to outperform another? This is the key question that IG Wealth Management’s Chief Investment Strategist, Philip Petursson explores in considering whether recent gains on the S&P/TSX Composite are coming from the success of the companies that make up the index, or are the gains the output of something else altogether.

IG Wealth Management’s Chief Investment Strategist, Philip Petursson reviews the most recent earnings season. This is when companies report their quarterly revenue (sales) and earnings (profits). Philip explains the difference between the two, how disappointing revenue can still result in increased earnings, which sectors were this season’s winners and losers, and what needs to happen for S&P 500 stocks to continue to increase in value.

It’s easy for market participants to get obsessed with tiny details, says IG Wealth Management’s Chief Investment Strategist, Philip Petursson. Right now, it’s an obsession with the U.S. Federal Reserve’s next move on cutting rates, which would require an acceptance that the economy is weakening. At the same time, however, markets expect earnings to grow by 10% over the next 12 months, suggesting a strong economy. Given this paradox, Philip says that now is the time to step back from the minute details and focus on what is currently crucial for investment portfolios.

On Monday, Japan’s Nikkei index saw its worst two-day drop ever, having reached an all-time high just three weeks ago, says Ashish Utarid, Assistant Vice-President, Investment Strategy. While several factors were in play, one in particular seemed to spark this extreme volatility: the carry trade. Ashish explains how a carry trade works, how it’s at risk from currency fluctuations and what you can do to help protect your portfolio from this kind of volatility.

The U.S. Federal Reserve has decided to stay put and follow market expectations by not cutting rates. However, by changing its statement, the Fed set expectations for a September cut, saying that job gains have moderated and that inflation was now only “somewhat elevated.” Ashish Utarid, IG Wealth Management’s Assistant Vice-President of Investment Strategy, asks, “Will the Fed’s eventual rate cut come too late?”

Having just announced a second interest rate cut that quickly followed the first, what’s next for the Bank of Canada? asks IG Wealth Management’s Chief Investment Strategist, Philip Petursson. The bank has clearly switched its priorities from fighting inflation (a battle it has surely won) to supporting the Canadian economy. Philip discusses the probable rate cuts ahead, the likely timing for the U.S. Federal Reserve to start following Canada’s lead, and what this will all mean to consumers and the economy.

Some commentators are worried about a market recovery where most gains are coming from a small percentage of companies, says IG Wealth Management’s Chief Investment Strategist, Philip Petursson. There is a fear that many of these large companies are very expensive, with overly high expectations. However, Philip explains that in this weird bull market — where most companies have underperformed so far — if the big companies start seeing a correction, another sector will be ready to step in to take its place.