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Don Vialoux.
Don Vialoux.

BNN Market Call

Three top stock picks from Horizon’s Don Vialoux Add to ...

Don Vialoux is a research analyst at Horizons Investment Management. His focus is on technical analysis and seasonal investing.

Top Picks:

Materials Select Sector SPDR ETF

The Materials sector kicks off its peak period of seasonal strength on Nov. 19, on average, running through to the start of January. Gains over the period average approximately 6.3 per cent, over the last 20 years. The sector enters a soft patch into January and takes off again into the spring months.

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Industrials Select Sector SPDR ETF

The Industrials sector is well within its period of seasonal strength that begins on Oct. 28, on average, running through to the spring. Gains between Oct. 28 and May 5 average approximately 13 per cent. Improving industrial production and manufacturing activity through the fourth and first quarters act as a catalyst for higher stocks prices within the sector.

Technology Select Sector SPDR ETF

The Technology sector began its period of seasonal strength right on queue this year, trading higher from the average seasonal start date of Oct. 9. The sector gains approximately 11.5 per cent, on average, between Oct. 9 and the end of the seasonal time-frame on Jan. 17. Positive influences pertaining to holiday and year-end tech spending, particularly in the areas of consumer electronics and business infrastructure, tend to drive stock prices higher through to the days leading into the Consumer Electronics Show (CES) in January.

Past Picks: August 22, 2013

SPDR Gold ETF
Then: $132.81
Now: $122.85
Total return: -7.50 per cent

SPDR S&P Pharmaceuticals ETF
Then: $75.44
Now: $86.15
Total return: +14.37 per cent

*SHORT* Canadian Pacific Railway
Then: $128.33
Now: $156.08
Total return: -21.95 per cent

Total Return Average: -5.03 per cent

Market outlook:

It’s the most wonderful time of year…for stock markets. Positive tendencies surrounding the year-end holidays lift stocks during this period that has historically been the best time of the year for equity benchmarks. Over the last 35 years, the S&P 500 index has gained 2.40 per cent between Nov. 18 and Dec. 31. Positive results were achieved in 30 of the past 35 periods with the few losing periods occurring during the recessionary periods of the early 1980s and 2000s. Returns for the S&P/TSX composite are even better with the Canadian benchmark averaging 3.30 per cent over the past 35 years, 31 of which produced a positive result.

Returns occur predominantly around two specific events during the six and a half weeks left into the end of the year: U.S. Thanksgiving and Christmas. With subdued volumes and a generally jovial atmosphere surrounding Thanksgiving Day in the U.S., stocks on both sides of the border tend to rise from the close on Tuesday through to the close on Friday of Thanksgiving week. Gains for the S&P 500 index and TSX composite have averaged 0.44 per cent and 0.69 per cent, respectively, since 1990. And every investor has become familiar with the notorious Santa Claus rally that runs from Dec. 15 through to Jan. 3, on average. Gains for the S&P 500 index and TSE composite have averaged 2.27 per cent and 2.80 per cent, respectively, since 1990. Factors influencing the rally include the quarter-end chase for performance, anticipation of strong earnings results from the fourth quarter, and subdued equity market volatility. Happy Holidays indeed!

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