Market Outlook

      The markets are moving sideways or upwards.  At the time of this writing, the S&P 500 closed Friday at 2415.82, which is  slightly below it's all time high. North of the border, the TSX Composite Index closed at 15,416.93.  The TSX Composite Index has been in a channel between basically 15300 and 15900 since the beginning of 2017.

      With the markets being at or near their all time highs, lots of investors are becoming fearful.  In Canada, the energy is one of the main industries for investors to invest in .  With oil trading anywhere between $45 and $53 per barrel, this definitely hurts the bottom lines of the oil patch companies.  In fact, a lot of laid off workers in the oil patch are hesitant to go back.  Furthermore, a lot of companies are offering lower wages. A few months ago, it was mentioned on the Business News Network aka BNN that a company who used to pay people $40 an hour hired people back at $15 an hour.

       The actual drilling rig activity in western Canada can be shown in the following weekly chart.

Source:  CAODC website

          The price of a barrel, on top of spring "break up", have a large impact on companies willing to drill right now.  These numbers would be slightly higher, but it is spring break up.  Spring breakup in western Canada, usually occurs between April and May. Basically, spring break up is where oil patch activity slows down tremendously due to the thawing of the ground.  The dirt roads become difficult to drive on and lease roads are even more horrific.  A lease road is basically a road off a main road or a dirt road that was not there recently.  These lease roads can be right through a wooded area some times. These lease roads start of smooth and there get more difficult over the time the rig is in operation due to weather events and large trucks coming in and out.  Canada is also a high cost producer for oil.

      Why all the mention on oil?  Energy companies are a major part of the Canadian markets and lot of these companies are struggling to maintain profitability.  To makes matter worse, the North American market is due for a recession. As nobody has a crystal ball,  we do not know when the recession is coming but it has been roughly 9 years since we had one. When there is a recession, the oil companies are not immune.

      Investors in Canada have limited investing opportunities within our borders. In order to invest in some sectors, we have to purchase US stocks. The companies like the Johnson &Johnson, Coca-Cola, Peps, and Phillip Morris do not exist up in Canada. Ideally, Canadians should buy US stocks when our dollar is on par with the US dollar.

   With the Canadian dollar trading at approximately $0.74 US, a Canadian investor is better off purchasing their investments in Canada.  With the state of the financial markets, investors have to be more careful in their entry points. A fellow blogger, Jason Fieber, recently published an article on a Daily Trade Alert with a video which  can you explore here.  At the bottom of Jason's article is a link to a video where Jason talks about how he researches stock.  Jason was the founder of the blog www.divendmantra.com and now is the founder and publisher of mrfreeat33.com

    Conclusion:

     With the markets at an all time highs, investors have be more careful at picking stocks and picking their entry points. Investors need to grow their cash position, so they can take action when an opportunity arises.  We do not know when the recession or a 10% to 20% correction will come.  If we did, we would be all more wealthy than we currently are.

      The new normal consists of less full time jobs and more part time jobs. Usually a company does not provide benefits for part workers.  Nowadays, an individual has to be open to working possible multiple jobs, become self employed or have side hustles.  The cost of living is going nowhere but up whereas wages are become stagnant or even less.  Since the 70s, wages have pretty much stayed the same adjusted to inflation.  I find a lot of people believe they get a "raise", when in fact they get a cost of living increase.  To me, getting a raise involves the employee being called into their boss's office and is praised for good performance and is rewarded by getting paid more. When an employee receives of cost of living increase, so do all his or her fellow employees.  For individuals to be able to invest frequently, their savings rate has to increase.  To increase his or her savings rate, an individual must lower their expenses and make more income.

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.