Down to Earth

  • 0 comments/
  • March 20, 2023

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February 10, 2023

Hi, Financial Friend!

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The Big North-American Market Dinos (BMD)

You Gotta Earn It

Source: Google Finance​

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The Toronto (Stock-Exchange): the Centre of the Universe

Canada’s largest stock index, the S&P/TSX composite, ticked down thanks to slumping commodities prices and what some would call a “mixed bag” of earnings results. Without any big rate hike or other economy related news this week, all eyes were on earnings and as you know, investors have a tendency to overreact to both good and bad news. There was no single sector that really dragged the broader index down as it struggled across the board. Despite this, the S&P/TSX composite did not lose too much ground, dipping slightly on the week. Investors are hoping Canadian stocks will be able to shake it off (Songspiration) and get back to the winning ways that we’ve seen in 2023 thus far.

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South of the Border

It was the same story in the States as U.S. stocks struggledthroughout the week. Earnings season continues to keep investors guessing as some company’s blow everyone away with expectation beating results while others disappoint, falling short of Wall Street’s expectations. However, that was not the main reason for this week’s pullback in the markets. After the U.S. Federal Reserve hiked interest rates a modest 0.25% last week, fear crept into the minds of investors when Fed Chair Jerome Powell said that inflation was cooling down but there was still a long way to go. The major indices, the S&P 500, and the Nasdaq composite, except the Dow Jones, all slid on the week.

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Risky ROI

Crypto

Source: Google Finance​

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Crypto Cooldown

After a scorching start to 2023, Bitcoin and the rest of the crypto market have faced a little more adversity in recent weeks. Bitcoin started off the week on Monday, with its fifth consecutive day in the red. This came after a solid rally that saw Bitcoin rise to its highest level since August of last year. Although the digital dollar struggled early on, it managed to stop the bleeding, leveling out around US $23,000 for the remainder of the week…Nothing wrong with a little quiet time every now and then to catch your breath. Investing in crypto can be a stressful endeavor!

Kraken Down

Elsewhere in the world of crypto this week, news broke that crypto exchange Kraken could be in hot water with the U.S. Securities and Exchange Commission (SEC) It was reported that Kraken is under investigation by the SEC as to whether rules were broken in regards to certain product offerings to U.S. investors. Kraken agreed to cease and desist offering assets and agreed to pay $30 Million in fines.

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Moderate and Mellow Market Methods

Sector Spotlight

High Hopes

Canadian outerwear maker Canada Goose Holdings Inc. has been keeping investors on their toes recently. They posted earnings last week, and while they beat analysts’s expectations for profit and revenue in the most recent quarter, underwhelming forward earnings guidance dragged the stock down. Canada Goose didn’t waste any time trying to fix that; They came out this week with an ambitious financial outlook and strategic plan that includes bringing in new customers, expanding their line of products, as well as entering new markets. The stock quickly bounced back from its post earnings slump following the news.

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Canada Goose says its expecting annual revenue for 2023 to be between CAD $1.18 to $1.2 billion, but is expecting to reach CAD $3 billion in annual revenue by 2028 as part of their new growth plan. It’s certainly a lofty goal but having a strong plan in place is always a good place to start. Do you think Canada Goose has the potential to reach their new objectives?

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Meme Stock Stalkers

Hedge Fund Frennzy

Hedge funds are feeling the pressure…According to a Goldman Sachs research note, hedge funds that bet against stocks globally exited those trades last week at the fastest pace since 2015, beating the speed at which they exited the infamous meme stock frenzy 2 years ago.

While this short squeeze fell under the radar in comparison to meme stock mania, it was a short squeeze nonetheless. Hedge funds abandoning their short positions implies that stock prices rose so much that the bearish short positions became too expensive to hold onto any longer. This was sparked by the stock rally back on February 2nd following the U.S. Federal Reserve’s announcement of a slowing pace of rate hikes, leading many to believe that interest rates will be peaking sooner than later. The short squeeze saw the techy Nasdaq composite climb by 3.25% last thursday alone, its biggest single day rally in more than 2 months. This was of course followed up by a disappointing Friday where stocks were dragged back down to earth following stronger than expected U.S. jobs data.

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ESG

Hot Topic

The war on ESG investing is heating up down south! Last November, the U.S. Labour Department finalized a rule that allows retirement plan managers to consider environmental, social and government (ESG) factors when making investment decisions. Now, this may come as no surprise given the emergence of ESG focused investing in recent years, but the new rule has been met with strong oppositionfrom many. That was on full display this week as more than 100 conservative leaders moved to block the rule on what they call “woke” retirement investing. To be fair, they are arguing against banning gas stoves which could have an impact on home cooked meals across America in a big way. We are in inflationary times, after all! Do you feel you could give up your gas burner and go back to your old ways of cooking on a stove top? Essentially, they are arguing against the E – Environmental and the S part of the ESG rules?!?!… spitting into the wind.

It appears that this anti-ESG movement has picked up some steam as well, with Bloomberg reporting that ETFs in the U.S. with ESG goals had net outflows of U.S $772 million in January, compared to the US $953 million of inflows for the same month last year. As with any political point of contention there is a lot happening behind the scenes and a lot of different motives at play. Investors can only watch and see how this will play out.

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Financial Jargon Word of the Week:

A gazelle company is a high-growth company that has increased its revenues by 20% or more each year for four or more years, starting from a revenue base of at least $100,000.

In a sentence, please!

I’m always on the lookout for the next Gazelle Company to invest in!

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