Insights: Will Jerome Powell make oil patch investors smile Friday?

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August 19th, 2019

The INK Canadian Insider (CIN) lost ground again last week, dragged lower by sagging oil & gas names. The broad Energy sector set new 52-week lows with the S&P/TSX Capped Energy Index dropping 3.5% last week. The sector index is down 19.6% over the past 90 days as of Friday. Another round of sector share price weakness means we will be looking for another peak in insider buying as that often coincides with a near-term bottom in stock prices. With increased insider buying and cheaper valuations, the sector is once again setting up with opportunities for contrarians with a high tolerance for risk. Generally, contrarian setups can take years to play out and that appears to be the situation in the oil patch.

There is a scenario, however, that could establish some near-term support for the group around current levels. Should Federal Reserve Chairman Jerome Powell signal on Friday in his Jackson Hole speech that the Fed is taking its inflation target more seriously and will do whatever it takes to reach 2% sustainably, it would likely weaken the greenback and support oil prices globally.

 

Oil & gas stocks would be obvious beneficiaries, and the case for jumping into some beaten-up names with attractive yields would be much stronger. Although the chances of a Powell pivot in that direction are probably less than 50%, they are not zero. Investors may have been increasing their bets on such a possibility Monday with the iShares S&P/TSX Capped Energy Index ETF (XEG) up 2.6%.


Top 3 Gainers Last Week

Company NameStock Symbol1 Week %
West Fraser TimberWFT6.1
Dream Office REITD.UN5.1
LinamarLNR4.0

Top 3 Losers Last Week

Company NameStock Symbol1 Week %
Ensign Energy ServicesESI-14.9
Gran Tierra EnergyGTE-11.2
Yangarra ResourcesYGR-10.3

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

Featured Broadcast

Insider of the Week

Jerome Powell

For global investors, there is only one speech that matters this week, if not this summer. It is Jerome Powell's 10:00 am EDT address to the Jackson Hole Economic Policy Symposium on the topic of Challenges for Monetary Policy. Indeed, the speech will be a challenge for Mr. Powell, with the US President demanding a 1% interest rate cut on Monday even as, the same day, Boston Fed chief and FOMC member Eric Rosengren was frontrunning the speech, warning against more rate cuts. If Mr. Powell leans towards his colleague from Boston, we will go out on a limb and predict more angry tweets from Mr. Trump. Markets may also not be so happy.

 

INK Canadian Insider Index

1 Year Total Return Performance


Historical Performance

Annualized Total Return as of August 19, 2019 04:49 pm
1 Year -11.90%
3 Years 0.99%
5 Years 1.54%
10 Years 9.14%

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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https://index.inkresearch.com
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