by Tom Bradley
I can think of lots of reasons why February could be a great month. With any luck, the skiing will continue to be great. The Raptors might go on an extended win streak. And I know for sure we’ll move a month closer to the end of the pandemic and another great Canadian summer.
In the Globe and Mail yesterday, Jennifer Dowty laid out 10 reasons why February may be “fantastic” for investors too (the article is available to G&M subscribers only). The piece will no doubt be popular — it’s positive, has a list in it, and makes a market prediction. This post is about the last point.
We’re all suckers for market calls, especially if they’re logical and include a few interesting nuggets we hadn’t thought of. The problem is, wait for it, they’re a waste of time and space. No matter how brilliant the commentator or articulate the argument, predicting the stock market for the month or year ahead is a mug’s game. Stock price moves are the result of thousands of forces that interact in unpredictable ways (this week, I heard the market referred to as a “complex, adaptive organism”).
Some of the forces are in plain view. Unfortunately, the less visible ones, which are sometimes the most powerful, only come into view after their impact has been felt.
Don’t get me wrong, articles about where the market is going (including Ms. Dowty’s) can be useful. My point is, use them for information, education, and entertainment, just don’t base your investment decisions on their conclusions.
Now that you’ve heard me out, I know what you really want — Ms. Dowty’s list. Here are the 10 reasons February might be fantastic:
1. “The trend is your friend” – keep riding the wave.
2. “Seasonal strength” – February is generally a good month for stocks.
3. “Supportive fundamentals” – strong corporate earnings.
4. “High valuation, but not outside the norm”
5. “Low interest rates”
6. “Steepening yield curve” – rising longer-term interest rates could indicate a stronger economy coming.
7. “Investor sentiment” – fewer ‘bullish’ investors in the last few weeks.
8. “Income source” - dividend yields are greater than bond yields.
9. “Portfolio positioning” - portfolio managers may get more aggressive in the first half of the year.
10. “Millennial investors” - “don’t underestimate the power of the millennial investors.”
As for our February forecast, we can say with confidence that markets will go up. And down. And sideways.
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