AGF Logo
  • Home
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Français
  • AGF.com
Skip to content
AGF logo
Insights and Market Perspectives
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
  • Contributors
  • Français
  • Search
Search
Close
Market Mood Swings

  • Investing and Market Views

For Print Only Logo
Insights and Market Perspectives

Market Mood Swings

Author: Kevin McCreadie

February 18, 2021

Rallying equity markets reflect a resounding optimism among investors, but that’s what also makes them unnerving, says AGF’s CEO and Chief Investment Officer.  

As predicted in our 2021 Outlook, equity markets have been volatile to start the year but continue to push higher and set new record highs. How would you describe the past few weeks of trading?

It is a very dynamic market right now. And it’s charged with emotion. On the one hand, there is almost overwhelming optimism among investors that the worst of the pandemic may finally be over now that multiple vaccines are being rolled out and administered, and that, by extension, economies around the world can slowly return to full capacity. At the same time, stimulus measures of governments and central banks are tempering what lingering concerns investors may have as it relates to still-elevated COVID-19 case counts and the threat of more contagious virus variants proliferating in the future. Moreover, these efforts are being validated by a U.S. earnings season that has largely beat expectations and some lofty GDP predictions, including one revised estimate from the U.S. Federal Reserve Bank of Atlanta that the U.S. economy will grow 9.5% in the first quarter of 2021. Still, there’s something also deeply unnerving about the current state of markets. U.S. equity valuations, for instance, are expensive by most metrics and seem too far in front of the economic resurgence they clearly anticipate. Perhaps more worrying, however – and we’ve talked about this before – is the growing euphoria of investors themselves. It’s no secret that retail participation, in particular, has skyrocketed over the past year and been an important catalyst in the rally of stocks back to all-time highs. But as we’ve seen recently, it isn’t without risks. If anything, the social media-induced short squeeze phenomenon demonstrates this best by showing how vulnerable markets can be when motivations for using them run counter to the fundamentals that help ground them.

Are there regional nuances that investors should consider given these dynamics?

Many of the factors driving stock markets are universal, but that doesn’t mean they are playing out in the exact same way around the world. So, yes, nuances matter and can have a large impact on regional performance. For instance, the speed at which each country can vaccinate its population and reopen its economy will surely influence the trajectory of its domestic market in relation to others. Likewise, the magnitude of future returns will at least in part be determined by a market’s sector composition. Take Canada, for example. Its vaccine rollout lags other countries to date and its largest city (and main financial hub), Toronto, is expected to remain partially locked down for another few weeks – if not longer. In turn, the S&P/TSX Composite Index has only just recently fully recovered from last year’s bear market selloff, and yet, because of its cyclical composition, it is also one of the best performing equity benchmarks so far in 2021.  

Keeping this in mind, what are some of the more intriguing geographic opportunities for investors?

Within the context of a 60/40 stock and bond portfolio, AGF’s asset allocation committee is overweight equities this quarter and the U.S. market remains our largest exposure. That said, Europe, Japan and other developed Asian markets such as Korea also look attractive, as do Emerging Markets, which should benefit from somewhat reduced trade frictions between China and the United States, as well as from an improving climate for manufacturing-based economies.

Kevin McCreadie is Chief Executive Officer and Chief Investment Officer at AGF Management Limited. He is a regular contributor to AGF Perspectives.

The commentaries contained herein are provided as a general source of information based on information available as of February 11, 2021 and should not be considered as investment advice or an offer or solicitations to buy and/or sell securities. Every effort has been made to ensure accuracy in these commentaries at the time of publication, however, accuracy cannot be guaranteed. Investors are expected to obtain professional investment advice.

The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

AGF Investments is a group of wholly owned subsidiaries of AGF and includes AGF Investments Inc., AGF Investments America Inc., AGF Investments LLC, AGF Asset Management Limited and AGF International Advisors Company Limited. The term AGF Investments may refer to one or more of the direct or indirect subsidiaries of AGF or to all of them jointly. This term is used for convenience and does not precisely describe any of the separate companies, each of which manages its own affairs.

™ The “AGF” logo is a trademark of AGF Management Limited and used under licence.

  

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

For further information, please visit AGF.com.

© 2022 AGF Management Limited. All rights reserved.

Written by

Kevin McCreadie

Kevin McCreadie, MBA, CFA®

CEO and Chief Investment Officer

AGF Management Ltd.

More from Kevin McCreadie

  • Investing and Market Views

Will the Fed and Other Central Banks Get It Right?

May 20, 2022

  • Investing and Market Views

Positioning a Portfolio for More Volatility Ahead

April 26, 2022

  • Investing and Market Views

Fade the Market Correction, but for How Long?

April 5, 2022

  • Investing and Market Views

War and the Fear of Recession

March 3, 2022

Get perspectives straight to your inbox.

Subscribe now

More articles like this.

Using Technical Analysis to Navigate Market Volatility

  • Investing and Market Views

Using Technical Analysis to Navigate Market Volatility

John Christofilos | June 21, 2022

John Christofilos, AGF’s Chief Trading Officer, explains why trendlines, moving averages and overbought/oversold signals matter…

Read More
Should Equity Markets Really Be This Volatile?

  • Investing and Market Views

Should Equity Markets Really Be This Volatile?

Abhishek Ashok | June 20, 2022

Every month, AGFiQ highlights the investment factors that are helping shape equity markets. Today’s focus is factor volatility and how the year so far stacks up to previous periods of heightened market turbulence.

Read More
Agriculture Stocks and the Looming Global Food Crisis

  • Investing and Market Views

Agriculture Stocks and the Looming Global Food Crisis

John Kratochwil | June 15, 2022

Fertilizer production and crop-protection companies may continue to benefit from elevated cash flows in the current environment. So might their investors.

Read More
AGF Logo
  • Industry and Expert Views
  • Investing and Market Views
  • Capitol Insights
Follow AGF

AGF Web Site Pages © 2022 AGF Management Limited. All rights reserved.

Links
  • Terms & Conditions
  • Privacy
  • AGF.com