Stimulus may stimulate a Canadian market rally

July 2nd, 2019

The question on every investor's mind this week is: will it be different this time? Following the Trump-Xi trade meeting on December 1st of last year, stocks rallied on Monday, December 3rd, but subsequently assumed a swan dive pattern falling sharply into Christmas Eve. At the time, the Federal Reserve was about to hike interest rates and that policy posture served as a huge headwind for stocks. Seven months later, the Fed has changed course 180 degrees, giving stock market bulls hope that monetary policy has now become a tailwind for stocks. In addition, Europe seems very serious about stimulating its economy by nominating politician and IMF head Chris Lagarde to lead the ECB while also letting Italy off the hook for going over its deficit limits.

On balance, insider sentiment is now leaning towards the bullish case for Canadian stocks. Our INK Sentiment Indicator is attempting to establish a traditional bullish pattern. The Indicator recently peaked at just over 160% on June 11th, meaning there were just over 1.6 stocks with key insider buying for every one with selling. Since the peak, the indicator has been gently falling, ending Friday at 145%. That suggests upwards momentum in Canadian stocks may well be taking hold. Since the June 11th sentiment peak, the mid-cap-oriented INK Canadian Insider Index has advanced 1.6%. The INK CIN's relative performance over the past 30 days is also helping the bullish case. The INK CIN Index is up 3.1% versus 1.2% for the large-cap oriented S&P/TSX 60 Index. When investors are pessimistic towards global growth, they often prefer the safety of large-cap stocks. A sustained one-month outperformance of the INK CIN has in the past signalled a more prolonged and powerful rally in growth-sensitive Canadian mid-caps.

Moreover, if the bullish thesis ends up being correct that a Fed rate cut will help spur on growth and perhaps even a weaker dollar, global-growth sensitive Canadian stocks should be a relative winner. Under such a scenario, we may finally get the late-cycle rally which failed to arrive last year due to a tightening Fed and a tariff-happy White House.

Top 3 Gainers Last Week

Company NameStock Symbol1 Week %
Canaccord Genuity GroupCF5.6
Empire EMP.A5.3
Bausch HealthBHC5.1

Top 3 Losers Last Week

Company NameStock Symbol1 Week %
Gran Tierra EnergyGTE-10.5
Yangarra ResourcesYGR-9.6
Ensign Energy ServicesESI-8.1

Returns are as of the last trading day of the previous week.

Featured Clip

Insider of the Week

Galaxy Digital Holdings Ltd. CEO Michael Novogratz

The CEO of cryptocurrency and blockchain investment holding firm Galaxy Digital Holdings Ltd (GLXY) has been buying again. He acquired 2,591,000 shares at a price of $2.400 through the public market on June 26th, 2019. This represents a $6,218,400 purchase. Get our take on the buying and the state of cryptocurrencies in our July 2nd INK morning report video summary.

INK Canadian Insider Index

1 Year Total Return Performance

Historical Performance

Annualized Total Return as of July 2, 2019 04:49 pm
1 Year -12.33%
3 Years 3.79%
5 Years 1.49%
10 Years 10.58%

5 Year Total Return Performance

The INK Canadian Insider Index is used by the Horizons Cdn Insider Index ETF (HII), a 2017 and 2018 Fundata Fundgrade A+ ® award winner.

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