Financials (Canadian)
ByCanadian financial stocks typically start their outperformance towards the end of October. Canadian banks have a year end of October 31st and they have often announced dividend increases at this time and forecasted positive results for the next year. In anticipation of positive announcements at the end of November, investors tend to increase their holdings in November.
So far this year, after positive announcements by most of the large banks, the sector has performed in a lackadaisical fashion. Despite the sector being in its period of seasonal strength it is not expected to dramatically outperform the market. As a result, it is not substantially overweighted in the HAC portfolio.
There maybe a pickup for Canadian banks after the American banks “prove” themselves. This is what took place last year. As it is the American financial sector that lead the market into its steep decline, investors will be looking for signs of change mid-January during the release of bank’s earnings. It is possible that the sector might pickup early if there is a expectation of strong earnings. Nevertheless, investors, like last year, will be hesitant to take a large position in Canadian banks until the sentiment for American banks becomes more positive.
