Stan Wong, portfolio manager at Scotia Wealth Management

FOCUS: North American large caps and ETFs

Top Picks: Expedia Group, Mastercard, Netflix

MARKET OUTLOOK:

Recent market volatility has been driven by escalating trade tensions, with the U.S. imposing tariffs on Canada, Mexico, and China, prompting retaliatory measures. While this uncertainty has led to market swings, history shows that reacting impulsively can be costly. For example, during the 2018 U.S.-China trade war, the S&P 500 Index dropped nearly 20 per cent in the fourth quarter but rebounded strongly, gaining 31.5 per cent in 2019. The COVID-19 selloff in early 2020 saw a 34 per cent decline in just over a month, yet the market reached new highs by August and finished the year up 17 per cent. Investors who remained patient through these downturns were rewarded with strong recoveries.

Despite short-term turbulence, the U.S. economy remains on solid footing. Gross domestic product (GDP) grew at an annualized rate of 2.3 per cent last quarter, unemployment hovers near multi-decade lows at 4.1 per cent, and corporate earnings for S&P 500 companies are projected to rise by 10 per cent this year. Consumer spending, which accounts for nearly 70 per cent of the economy, remains resilient, while manufacturing output has held up despite trade pressures. Pro-business policies, including tax cuts and deregulation, should continue to support economic expansion by reducing corporate tax burdens and easing regulations in key sectors and industries such as energy, financial services, and manufacturing. These measures are expected to drive business investment, job creation, and profitability.

At The Stan Wong Group, we anticipate continued market choppiness but remain constructive on equities for the year ahead. Political factors may also help stabilize sentiment. With midterm elections approaching, U.S. President Donald Trump is likely to adopt a more moderate stance on trade policy to maintain voter confidence and avoid economic strain. Historically, election cycles tend to bring a shift toward policies that promote market stability and growth. Additional tax incentives or stimulus measures could further bolster economic momentum heading into the election cycle. While volatility can be unsettling, we are making tactical portfolio adjustments to navigate and capitalize on these conditions. Our focus remains on fundamentals, ensuring our portfolio mandates are well-positioned for long-term growth despite short-term market fluctuations.

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TOP PICKS:

Expedia Group (EXPE NASD)

Last bought this month at around US$163. With anticipated revenue of US$14.5 billion for fiscal 2025, Expedia Group (EXPE) continues to benefit from the resilience of global travel, driven by strong demand for lodging, flights, and vacation packages. Its broad portfolio of brands—including Expedia, Hotels.com, and Vrbo – positions it well to serve diverse consumer segments. The company’s ongoing investments in its digital platform and customer experience are fueling booking growth, while cost efficiencies and strategic partnerships enhance profitability across its business segments. Strong cash flow supports reinvestment in growth initiatives and shareholder returns. Recent earnings exceeded expectations, with a significant rebound in travel bookings highlighting the strength of the post-pandemic recovery and Expedia’s market position. The company is projected to deliver an average earnings growth rate of 19 per cent annually over the next few years. With shares down 23 per cent from recent highs amid the broader market decline, the pullback may present an attractive entry point for long-term investors.

Mastercard (MA NYSE)

Last bought in this month at around US$525. With projected revenue of nearly US$32 billion for fiscal 2025, Mastercard (MA) continues to capitalize on the global shift to digital payments, driving strong transaction growth. Cross-border volumes are increasing as travel rebounds, contributing to high-margin revenue expansion. The company’s expansion into fintech, open banking, and AI is unlocking new long-term opportunities, while strategic partnerships and acquisitions further strengthen its competitive edge. High operating margins and robust free cash flow support share buybacks and dividends. Recent earnings exceeded expectations, with cross-border volume growth driven by rising travel demand. Mastercard is on track to deliver an average earnings growth.

Netflix (NFLX NASD)

Last bought this month at around US$855. With forecasted revenue of more than US$44 billion for fiscal 2025, Netflix (NFLX) remains a dominant force in streaming, driven by strong subscriber growth and pricing power. The company now boasts over 300 million global subscribers, reflecting its broad appeal. The company’s ad-supported tier and crackdown on password sharing are improving margins, while its investment in original content and international expansion continues to fuel engagement and revenue. Free cash flow is accelerating, supporting both share buybacks and future growth initiatives. AI-driven content recommendations and ongoing cost efficiencies further enhance profitability. Recent earnings exceeded expectations, with strong subscriber additions and revenue growth underscoring Netflix’s sustained momentum. The company is projected to deliver an average earnings growth rate of 23 per cent annually in the coming years. NFLX shares are down 15 per cent from recent highs, potentially providing a compelling long-term growth opportunity.

PAST PICKS: March 26, 2024

Dollarama (DOL TSX)

• Then: $103.05
• Now: $148.29
• Return: 44%
• Total Return: 44%

Novo Nordisk A/S ADR (NVO NYSE)

• Then: US$129.41
• Now: US$76.38
• Return: -41%
• Total Return: -41%

Palo Alto Networks (PANW NASD)

• Then: US$286.69
• Now: US$176.50
• Return: 23%
• Total Return: 23%

Total Return Average: 9%