Positive momentum for the TSX may be waning, led by the performance of the heavyweight trio–energy, financials and materials, says Prab Sagoo, associate director at Nasdaq Advisory Services, in his weekly market commentary.

But small-cap outperformance remains (+9.6% year-to-date) as investors continue to search for bargains, he adds.

More highlights

  • Canadian data showed a strong bounce in jobs last week, resulting in the index adding to its recent outperformance. The loonie is now back to within touching distance of its end-of-March highs, +7% YTD versus the U.S. dollar.
  • The Bank of Canada will make a rate announcement on Wednesday, but no change is expected. But, the Bank’s tone is likely to be a little more upbeat than in January given the recent favorable economic data and impending fiscal stimulus. Also, there may be some hawkish notes on housing market activity, while tepid inflation may keep rates on hold for the medium term.
  • Further, the Bank of Canada will have now incorporated the expected fiscal impact from the proposed governmental stimulus measure into their models, so wording around what this means will be carefully studied.
  • Short bets steadied at the end of March against TSX Composite constituents, with all but one sector seeing more decreases than increases. Meanwhile, cumulative changes in TSX short interest have also started to slow down this year, with short bets against the iShares S&P/TSX 60 Index ETF leveling out just above the 60-million share mark. Outperformance of the TSX versus global indices, and a strengthening loonie, has squeezed out a few of the shorting crowd.