TopPicks from Andrew Pyle, investment advisor and portfolio manager, CIBC Wood Gundy
FOCUS: North American equitiesAfter the worst September in 20 years, October isn’t exactly starting on the right foot. Even though volatility has not returned to previous peaks, irrationality is at a premium. Central bankers and institutional investors are in an arm wrestling match but haven’t noticed that the table is starting to disappear.
Friday’s jobs report from the U.S. was not stellar, but anything above 200,000 was going to cement at least a 50 basis point hike by the U.S. Federal Reserve on Nov. 2, but the dip in the unemployment rate gets us 75 BPS. As much as the consumer price index report this week is a key indicator to watch, the risk is now asymmetrical. If it were to come in heavier than expected, I don’t think the market raises the ante to believing the Fed goes a full percentage point at the next meeting.
From an equity perspective, this doesn’t mean stocks can’t stabilize here. The drop late last week and on Monday was as irrational as the bounce a week ago. The 3,600 level is key for the S&P 500 and it is key that the TSX holds above the 18,250 level. A bounce here gives the index an opportunity to test resistance up in the 19,500 area . An extended move higher in crude oil towards US$100 would give the TSX support.
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