Market Update: Volatility, AI Stocks, and Portfolio Positioning with Andrew Auerbach

Andrew Auerbach provides an update on the market, highlighting the recent spike in volatility and the lagging effects of historic rate hikes. He emphasizes the importance of valuing companies correctly, especially amid the volatility of stocks like Nvidia, and discusses Delisle's current portfolio positioning with a focus on gold, utilities, and international equities.

• Introduction:
  
  
  • Andrew provides an update on the current market conditions, emphasizing the rapid changes and key themes affecting the markets.
• Market Volatility and Rate Hikes:
  
  
  • Discussion on historic rate hikes and their delayed impact on the economy, typically felt 12-18 months later.
  • Current signs of economic strain, particularly in consumer behavior and employment levels, reflecting the lagging effects of these rate hikes.
• Geopolitical Tensions and the VIX Spike:
  
  
  • Geopolitical tensions in the Middle East, Russia, and Ukraine have led to increased market volatility.
  • The VIX (volatility index) spiked dramatically, reaching 66, a level not seen since the financial crisis and COVID pandemic.
• Canadian Banks and Financials:
  
  
  • Underweight position in Canadian banks due to their heavy exposure to potential economic slowdowns.
  • Discussion on the risk associated with the $3.9 trillion in outstanding loans by the Canadian banks.
• Performance of Major Indices:
  
  
  • Despite the volatility, major indices like the S&P 500, NASDAQ, and TSX show positive year-to-date performance.
  • The S&P 500 is up 11%, NASDAQ up 11%, and TSX is up 6%.
• Magnificent Seven Stock Analysis:
  
  
  • Detailed analysis of the "Magnificent Seven" stocks, highlighting their strong year-to-date performance but recent pullbacks.
  • Focus on Nvidia's 102.8% YTD performance and recent 20% drop, discussing the importance of valuation and market cycles.
• AI and Market Fervor:
  
  
  • Commentary on the hype around AI and the parallels to the dot-com boom.
  • Reminder of the importance of cautious investment and avoiding momentum-driven decisions.
• Expected Rate Cuts by the Fed:
  
  
  • Universal consensus on significant rate cuts by the Fed, with expectations of three rate cuts by the end of 2024 and a potential fourth in January.
• Gold as a Hedge:
  
  
  • Gold's role as an effective hedge against market recessions, with continued high performance and Delisle’s overweight position in gold.
  • Discussion on global gold accumulation trends, particularly in Eastern countries.
• Delisle Portfolio Positioning:
  
  
  • Overview of Delisle’s portfolio strategy: underweight in equities, underweight in Canadian financials, overweight in utilities and gold, with international exposure in India and Japan.
  • Positive outlook on the continued strategy and its performance through 2024.