We’ve got some exciting things in store for you! Stay tuned…
Topics of the Week!
Crypto
Commodity Craze
Meme Stocks Stalker
Moderate and Mellow Markets
ESG
🦖But first let’s check out those BMDs! 🦖
🥁🥁🥁🥁🥁🥁
The Big North American Dinos
Did Someone Say Rebound Rally?
Source: Google Finance
Toronto Stock Exchange
What’s Going On Here?
This week’s stock market volatility had investors screaming “WHAT’S GOING ON? (Songspiration)…Yes, we’re looking at you, bank stocks. The country’s largest stock market index, the S&P/TSX composite, was already off to a slow start thanks to losses in the energy and financial sectors, but it was mid week when things really went south. Investors were already on edge following last week’s collapse of Silicon Valley Bank (SVB), and Suisse Bank (NYSE:CS)added to those fears with its report that it had identified “material weaknesses” in the firm’s internal controls on financial reporting. Canadian stocks were able to claw back some of those losses later in the week, but the S&P/TSX closed this week in the red.
What Does This Mean For You, a North American Investor?
For investors, the recent developments in the financial sector across the world are a reminder that even though Canada’s financial institutions may be strong, it doesn’t mean that investors aren’t affected by the performance of banks from around the world. While the struggles in the financial sector are something that almost no investor could avoid, it’s still crucial to have a well diversified portfolio in order to help you weather the storm when fear takes over the markets.
South of the Border
What’s Going On Here?
It was all about the banks this week in the US! After last week’s ugly performance, the big American stock market indices, the S&P 500, and the Nasdaq composite came out on top in a volatile week of trading with the S&P leading the pack. With last week’s collapse of SVB, and the more recent news of Credit Suisse and First Republic Bank’s (NYSE:FRC) struggles, it looked like investors were in for another week in the red. Alas, nobody was hung out to dry as Credit Suisse received a generous loan from the Swiss Central Bank, while a group of banks said it would aid First Republic with US $30 billion in deposits. The backstopping across the board helped to boost confidence in the banking system, and led two major American indices to an unlikely week in the green.
What Does This Mean For You, a North American Investor?
Investors with heavy exposure to financials were certainly feeling the heat this week, and no doubt suffered some losses as well. While this can be discouraging, investors should feel good about the fact that the regulators, and other banks, did just about everything they could to stop things from getting out of hand. Fear did not win out this time! American investors are now shifting their focus to next week’s rate hike announcement from the U.S Federal Reserve.
🚨🗞️Now onto our top 5 stories!🚨🗞️
Crypto
Source: Google Finance
What’s Going On Here?
Amidst all of this week’s stock market volatility, the crypto market was resilient! Bitcoin, Ethereum, and nearly the entire crypto market rallied this week, even after regulators announced the closure of Signature Bank, the last major crypto bank in the US. So where’d all of this optimism come from?? Investors had two main reasons for their increased risk appetites this week. The first was that US regulators announced plans to backstop both deposittors and financial institutions associated with the belly up of Silicon Valley Bank…In other words the regulators said “don’t worry, we’ll take care of this.” This feeds into the second reason for the risk on approach. Because regulators stepped in to stop the bleeding in SVB and Signature Bank’s fallout, investors were of the opinion that the Fed will be less aggressive with their rate hikes going forward.
What Does This Mean For You, a North American Investor?
This week’s price movement in the crypto market tells an interesting story for North American investors. The recent rally is something that investors who already hold cryptocurrencies can be happy about, but just because crypto currencies are on the rise, doesn’t mean that investors shouldn’t be concerned about the closure of a major crypto bank. The big take home message here is to exercise caution. It’s important not to get too high or too low as a crypto investor, because you never know what might happen next.
Commodity Craze
What’s Going On Here?
Precious and base metals alike were on the rise as investors flocked to the “safe-haven” assets following the collapse of Silicon Valley Bank (SVB). The recent gain represents a massive turnaround for gold, which in the year prior to SVB’s downfall was down roughly 12%. The recent increase even saw gold jump above its 50-day moving average, hinting at a change in momentum. Other metals like copper and aluminum gained as well.
What Does This Mean For You, a North American Investor?
For investors, the rise in precious and base metal prices due to the collapse of Silicon Valley Bank and the resulting flight to safety is an important reminder of the importance of diversification. Investing in safe-haven assets such as gold and copper can help mitigate the risk of market volatility and protect against potential losses. That being said, investors should also be cautious not to overreact to short-term market events and stick to their long-term investment strategy that takes into account their individual risk tolerance and investment goals.
Meme Stock Stalkers
What’s Going On Here?
Earlier this year, in an effort to raise more capital, popular meme stock AMC (NYSE:AMC) announced a polarizing reverse stock split that would see its preferred (APE) shares converted into common stock. This week, AMC investors approved the conversion of APE shares into common shares and a reverse stock split of the company’s common shares at a 10:1 ratio. So far, the results show the conversion proposal passed with 88% of investors voting in favor of the proposal. AMC CEO Adam Aron praised the result, saying it shows “your determination to keep AMC a strong and innovative company and the leader of our industry.” Of course, the company’s CEO said all the right things, but a dark cloud is looming over the situation. There is currently a class-action lawsuit claiming AMC circumvented shareholders by creating the preferred APE shares. The lawsuit could delay any new debt-raising action, with a hearing scheduled for April 27.
What Does This Mean For You, a North American Investor?
For the average North American investor, the chronicles of a single meme stock doesn’t mean much, but for AMC shareholders, the conversion of APE shares to common stock, and the reserve split is a hot topic! On one hand the company sees the move as a necessary step to reduce debt and raise more capital. Of course, reducing debt is good, but at what cost? The conversion of APE shares to common shares will dilute the value of common shares, something investors aren’t so crazy about. That’s where the lawsuit comes in. Owners of APE shares had the upper hand in terms of voting power and owners of common shares feel that they are being wronged by AMC’s creative attempt at reducing debt.
Moderate and Mellow Markets
What’s Going On Here?
All aboard the takeover train! Canadian Pacific Railway (TSX:CP) has won approval from the US Surface Transportation Board for its US $27.3 billion acquisition of Kansas City Southern, a deal that would create the first railway network connecting the US, Mexico, and Canada. Even if the merger goes through, CP Rail would still remain the smallest of six major North American railroad operators. The deal still requires approval from Mexican regulators, who have raised concerns about the impact on competition. The combined company is expected to offer new routes for shippers, boost competition, and reduce congestion on existing rail lines.
What Does This Mean For You, a North American Investor?
The approval of Canadian Pacific’s acquisition of Kansas City Southern means that North American investors could benefit from the creation of the first railway network connecting the US, Mexico, and Canada. Ideally, the deal will lead to cost savings and increased efficiency for CP, which could benefit shareholders in the long term. While becoming the first railway network connecting all the US, Mexico, and Canada would be no small feat, investors should still make sure to do proper due diligence on CP rail before making any investment decisions.
ESG: Environmental, Social, Governance
What’s Going On Here?
The rules are changing! Canada’s financial regulator, the Office of the Superintendent of Financial Institutions (OSFI), recently announced its new guidelines for climate risk management, outlining requirements for banks and insurance companies to manage and disclose climate-related risks. The regulations will apply to federally regulated financial institutions with assets over CAD $1 billion. The requirements cover reporting relating to climate risks and opportunities in the short, medium, and long term, including the physical risks associated with climate change, as well as the risks and opportunities associated with the transition to a lower-carbon economy…Sounds like they’ve covered all the bases.
What Does This Mean For You, a North American Investor?
This is good news for investors! Everyone expects transparency from the companies that they invest in, but when you’re an ESG focused investor, transparency is a necessity. Greenwashing is a big problem and implementing consistent reporting requirements is a big step in washing away…greenwashing. This information can help investors make more informed decisions about where to allocate their capital, and can also encourage financial institutions to take more effective action on climate change.
Contango is a situation where the futures price of a commodity is higher than the spot price (the current price). Contango typically occurs when a commodity’s price is expected to rise in the future.
In a sentence, please!
“I’m seeing contango with some commodities and I’m feeling the figures so I think I’ll hold onto my long positions till the music stops.”
