Market Update – May 2023

Market Update                                                                                                                    May 2023

Technology as a sector, has been leading the market this year.  Over the last decade this sector has done very well, typically leading bull markets.  Last year, it was the worst performing sector.

So, what is the difference between this year and last?

Well, as interest rates started to rise, technology (growth stocks) started to fall in value.  Growth stocks as a whole are long-term assets and their value is based on anticipation of future growth.  When interest rates rise that growth is effectively discounted and valuations drop.  Technology companies also tend to need constant capital infusions that get more expensive as interest rates rise.

Recently, we experienced the quickest rise in interest rates in history by central banks in order to fend off inflation.  However,  the market seems to be anticipating stabilization in interest rates and eventual retraction and as a result, we are seeing technology shares starting to rise.

Since 1987, growth stocks have tended to trade inversely to interest rates. 

I think there are two forces at work in the market right now.  One is anticipation of stabilization and eventual reduction in interest rates and the other is recession as the economy gets squeezed by those higher interest rates.  Hmmmm.

I think Artificial Intelligence and Cyber Security have significant potential in the technology space.

An easy way to participate is to own the backbones like Alphabet, Microsoft, Nvidia, Advanced Micro.  The same can be said in cyber security space where leadership is among four or five names.

What about a recession?   Well, given the balance sheets of many technology companies and an economy that still has full employment, I suspect any recession will be of the light in nature.  I am more interested in what these types of companies will be worth in a few years, particularly given the pullback in their shares last year.

Sure, there are some adjustments.  For instance, semi-conductor demand for vehicles will likely fade a bit from major shortages last year if car sales weaken with rising interest rates.  Otherwise, stay the course owning technology as one of several diversified sectors within your portfolio.

*I and/or my family own shares in the companies mentioned in this letter. 

I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial. 


Best regards,

National Bank Financial


Rob Hunter

Senior Wealth Advisor


Sources: NBF,, Fidelity, Reuters

National Bank Financial is an indirect wholly owned subsidiary of National Bank of Canada. The National Bank of Canada is a public company listed on the Toronto Stock Exchange (NA: TSX). 

This information was prepared by Rob Hunter, an Investment Advisor with National Bank Financial. The particulars contained herein were obtained from sources that we believe reliable but are not guaranteed by us and may be incomplete. 

The opinions expressed are based on our analysis and interpretation of these particulars and are not to be construed as solicitation or offer to buy or sell the securities mentioned herein. National Bank Financial may act as financial advisor, fiscal agent, or underwriter for certain of the companies mentioned herein and may receive remuneration for its services. Rob Hunter, National Bank Financial and/or its officers, directors, representatives, and associates may have a position in the securities mentioned herein and may make purchases and / or sales of these securities from time to time in the open market or otherwise. 

The opinions expressed herein do not necessarily reflect those of National Bank Financial. 

Several of the securities mentioned in this article may not be followed by National Bank Financial’s

Research department. The investment advice given only applies to residents of the provinces of British Columbia, Alberta, Manitoba, Saskatchewan, Ontario, and Quebec. National Bank Financial is a member of the Canadian Investor Protection Fund.


Market Update – April 2023

Market Update                                                                                                                    April 2023

The stock market is rallying so far this year. 

TSX (Canada broad market)        +4.6%

SPX (U.S broad market)                +7.4%

Nasdaq (tech laden index)           +16.4%

That may seem unusual given current geopolitics, some recent American banking issues, budgets and an apparent end to a long period of globalization.  I believe that the market is anticipating that interest rates have likely crested or are close to it.  Perhaps too, the U.S. Federal Reserve will be less hawkish as inflation falls. 


Here in Canada, inflation has been dropping for nine months to about 5.2%.  The forecast for mid-year is 4.8%. 


This isn’t the 2% that central bankers wanted but things are moving in the right direction.


Volatility day-to-day might best be explained by fickle unbalance between hope that interest rate hikes are near over, and the reality that they are starting to slow parts of the economy.


The yield curve remains inverted and it has been for months.  This is when short-term interest rates are higher than long-term rates.  Historically, this is a very strong technical indicator for recession as liquidity becomes tighter and we stop spending and/or borrowing as much as consumers. 

From an investment perspective, we have been busy planning for the worst while hoping for the best.    We have been selling long calls out to next year to maximize income in portfolios and have shifted new capital investment largely to income paying securities with larger weightings to Canadian banks, energy infrastructure and utilities, while maintaining exposure to technology.  I don’t think it is a ‘risk off’ market, but rather balanced to more caution for the time being.

It is the technology laden Nasdaq index which is leading the market year-to-date. 

While technology typically trades down with rising interest rates, it historically rallies with anticipated lower interest rates. 

I am not concerned about the recent banking issues in the U.S.  The American market has over 600 publicly listed financials and there have been problems in few.   Our banking sector of choice remains Canada with 6 regulated banks, who haven’t cut a dividend in 100 years and offer great capitalization.

Energy companies have been cleaning up their balance sheets, reducing debt, buying back their stock and raising their dividends.  While pricing has fallen more recently, particularly in natural gas which is looking oversold, we are at an end to the seasonal strength that comes with winter. 

This chart captures the rally in Canada (red), the SPX – U.S. broad market (blue) and the tech heavy Nasdaq (green).