Stan Wong, portfolio manager, Scotia Wealth Management

FOCUS: North American large caps and ETFs

Top Picks: Apple, Expedia Group, The Invesco S&P 500 Equal Weight Index ETF

MARKET OUTLOOK:

Recent market volatility, fueled by escalating geopolitical tensions and the White House’s announcement of new punitive (and for now, not as punitive) tariffs, has understandably left investors on edge. With trade policies impacting multiple regions around the globe, uncertainty has sparked sharp swings in sentiment, tempting some to react to short-term market moves. But periods of turbulence are nothing new for long-term investors.

History reminds us that market downturns are a normal part of the investment cycle. During the 2008 global financial crisis, markets saw one of their deepest declines – but those who stayed the course were rewarded with a strong recovery. In late 2018, concerns around trade tensions and slowing global growth triggered a sharp pullback, only for markets to rebound swiftly in early 2019. Even the 2020 COVID-19 crash was followed by a rapid and powerful rally to new highs. These episodes underscore an important lesson – markets are resilient, and long-term perspective is essential.

Earlier this week, familiar signs of investor anxiety resurfaced. The CBOE Volatility Index (VIX), often referred to as the “fear gauge,” has spiked sharply, reflecting heightened expectations for market turbulence. Meanwhile, the Fear & Greed Index – which tracks sentiment across indicators like volatility, momentum, and safe-haven demand – had dipped deep into “extreme fear” territory. While these indicators don’t predict exact market bottoms, they can be powerful contrarian signals. Historically, elevated fear levels have often coincided with oversold conditions and potential buying opportunities, as excessive pessimism becomes priced into the market. For disciplined investors, these moments can provide attractive entry points ahead of eventual rebounds.

At The Stan Wong Group, we anticipate continued market choppiness in the near term but remain constructive about a potential recovery in equities. As U.S. midterm elections draw closer, political dynamics may help to soothe market concerns. U.S. President Trump could adopt a more measured approach to trade policy to preserve voter confidence and mitigate economic risks. Furthermore, the potential for additional tax cuts, fiscal stimulus, or deregulation could contribute to easing market anxieties. Historically, election years often prompt policy adjustments aimed at fostering market stability and supporting economic growth.

While volatility can be unsettling, we view it as an opportunity – not an obstacle. Our team is actively making tactical portfolio adjustments to capitalize on market dislocations while remaining anchored to strong fundamentals. Above all, our focus is on ensuring that our portfolio mandates are well-positioned for long-term growth – regardless of short-term noise.

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TOP PICKS:

APPLE (AAPL NASD)

Apple $(AAPL)$ remains a dominant force in the tech sector, supported by its iconic brand, robust cash flow, and loyal global customer base. Fiscal 2025 revenue is forecasted to exceed US$408 billion, highlighting Apple’s scale and influence. Shares have come under pressure due to concerns over U.S. tariffs and softer hardware demand. However, the growing services segment offers more stable, high-margin revenue that helps offset near-term uncertainties. Apple’s pricing power enables it to absorb or pass through some tariff-related costs, while efforts to diversify production beyond China may reduce long-term geopolitical risk. Continued investment in AI, wearables, and health tech supports future growth. With shares recently down as much as 33 per cent from previous highs and trading near the 200-week moving average, the shares present a compelling medium and long-term entry point. Backed by a strong balance sheet, a disciplined capital return program, and forecasted earnings growth of 15 per cent, Apple remains well-positioned for exceptional growth.

EXPEDIA (EXPE NASD)

Expedia Group (EXPE), supported by leading brands such as Expedia, Hotels.com, Hotwire, and Vrbo, is a key player in the global travel and online booking industry. With anticipated fiscal 2025 revenue of US$14.4 billion, Expedia benefits from resilient travel demand across lodging, flights, and vacation packages. Investments in digital platforms and customer experience are driving growth, while cost efficiencies and partnerships enhance profitability. The company’s recent quarterly results surpassed expectations, highlighting Expedia’s strong market position and the post-pandemic recovery in travel bookings. Shares were down as much as 37 per cent from recent highs and trading near long-term technical support at the 200-week moving average. With projected annual earnings growth of nearly 20 per cent, strong cash flow, and diversified revenue streams, Expedia is well-positioned to deliver sustained value to investors as global travel trends continue to thrive.

INVESCO S&P 500 EQUAL WEIGHT INDEX ETF (EQL TSX)

The Invesco S&P 500 Equal Weight Index ETF $(EQL)$ offers a more balanced approach to U.S. equity exposure by equally weighting all 500 constituents in the S&P 500. This strategy mitigates the concentration risk typically associated with traditional market-cap weighted ETFs, ensuring broader participation across sectors like industrials, financials, and consumer staples. The S&P Equal Weight Index had declined more than 17 per cent from its previous highs and trading near potential long-term support at the 200-week moving average. With a management expense ratio $(MER.UK)$ of 26 basis points, EQL provides diversified and cost-effective exposure to the U.S. equity market. Its equal-weight strategy is particularly attractive to investors seeking to capture U.S. equity opportunities across a broader range of sectors, as market leadership shifts beyond mega-cap technology stocks.

PAST PICKS: March 26, 2024

DOLLARAMA (DOL TSX)

• Then: $103.05
• Now: $152.62
• Return: 48%
• Total Return: 48%

NOVO NORDISK (NVO NYSE)

• Then: US$129.41
• Now: US$61.89
• Return: -52%
• Total Return: -51%

PALO ALTO NETWORKS (PANW NASD) – Stock Split Dec 16, 2024

• Then: US$286.69
• Now: US$168.89
• Return: 18%
• Total Return: 18%

Total Return Average: 5%