This edition of Market Factors starts with the perspective of one strategist who finds historical significance in the current era of investing. We move on to the surprising outperformance of low-quality stocks, and later, scientific developments ideally suited to Halloween.
Market trendsBuy the dips – the rally has room to run
The Impossible Becomes Commonplace is the phrase that best describes markets since the crash of 1987, according to Evercore ISI strategist Juan Emanuel. The era has been characterized by expansion and implosion of asset bubbles every few years while major technological evolutions continue. In his latest report released over the weekend, Mr. Emanuel outlines his belief that investors will be rewarded for buying any markets dips, just as they have been since the financial crisis.
Mr. Emanuel sees central banks as a key component of the technological revolution. He writes, “Central Banks have learned that aggressive action can smooth or even avert systemic issues, in turn promoting entrepreneurial risk taking and use of leverage.”
This perspective, based on an intertwining of loose monetary policy and ongoing technological change, is somewhat new and puts central banks in a better light. Tight monetary policy during a time of tech-led economic and social upheaval – the fallout from the arrival of the PC, internet, mobile computing and AI – would probably look like a grave error to historians studying the era in the future.
The technology and monetary policy marriage might also explain why strategists and economists have been unable to build a consensus as to where we are in the business and market cycles.
I strongly suspect that market cycles don’t exist in the way they used to. Certainly they don’t resemble the distant past when the North American over-expansion of manufacturing capacity created product gluts, lower credit demand and prices, and eventually layoffs and economic contraction.
Companies are also far more globally diversified now, both in terms of revenue and manufacturing capacity. Slow sales for iPhones, for instance, would likely cause more layoffs in China than the U.S. More sources of regional demand are also capable of smoothing the ups and downs of revenues, making market cycles harder to identify.
Perhaps most importantly, central bank willingness to step in with stimulative rate cuts, and federal governments’ similar responsiveness in expanding fiscal spending, may be preventing down cycles from fully taking shape.
Mr. Emanuel believes that the AI rally will continue, thanks in large part to U.S. monetary conditions. At the same time, in a recent CNBC interview, he warned investors that “choppy [market] movements are part of the script,” as we learned during the 1990s.
The strategist has repeatedly referred to his AI Enablers, Adopters and Adapters list of related stock ideas developed earlier in 2025. Companies beyond the usual Magnificent Seven suspects on that list most likely to interest domestic investors include Visa Inc. (V-N), Walt Disney Co. (DIS-N), United Parcel Service Inc. (UPS-N), Snowflake Inc. (SNOW-N), Western Digital Corp. (WDC-Q), Incyte Corp. (INCY-Q) and Elastic NV (ESTC-N).
Traders work on the floor at the American Stock Exchange (AMEX) at the New York Stock Exchange (NYSE) in New York City, U.S., October 20, 2025.Brendan McDermid/Reuters
Equity frothHigh quality stocks underperform
Investors told to buy low quality stocks would likely tell their adviser to get lost but that strategy would have outperformed over the past 12 months. BofA Securities’ Australia-based quant strategist Nigel Tupper’s latest report, a 166 pager, is called “Can quality underperformance persist?” It begins by noting that global high-risk stocks (measured by beta and price volatility) have outperformed quality companies (in terms of earnings stability) by a near-record 55.7 percentage points during the past year.
The top investing styles for September were Risk and Momentum, which outperformed the MSCI All-Country World Index by 5.7 and 3.2 percentage points, respectively. Dividend and small cap underperformed by 4.5 and 3.0 percentage points.
Mr. Tupper doesn’t spend any time attempting to answer the question in his report’s title despite the length of the piece – to be fair that’s not the point of the report – but the findings add credence to the argument that markets are getting frothy and perhaps even toppy.
Technicians work at a genetic testing laboratory of BGI, formerly known as Beijing Genomics Institute, in Kunming, Yunnan province, China December 26, 2018.CHINA STRINGER NETWORK/Reuters
DiversionsShopping for a new baby
Companies that include Toronto’s Juniper Genomics are developing genetic testing technologies so sophisticated that parents may soon be able to select child types from a variety of options.
Preimplantation genetic testing (PGT) is technology already in use that can detect genetic disorders like sickle cell anemia or Huntington’s disease during the in vitro fertilization process.
There are new startups, unsurprisingly funded by tech billionaires including Elon Musk and Peter Thiel, that are using algorithmic techniques purportedly able to predict baby attributes including intelligence and susceptibility to mental illness using DNA from five-day-old fertilized human eggs.
From reports in the M.I.T. Technology Review, it sounds possible that potential parents will be able to choose between fertilized eggs based on the health and character traits that will become visible as the child matures.
The essentials
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Globe Investor highlights
Ian McGugan provides three reasons to be deeply skeptical about the current gold rally
Tim Shufelt on why so many Canadians are leaving money on the table when it comes to investment returns
Norman Rothery details how momentum stocks can work very well for Canadian investors and has the latest list of them
Aritzia is an expensive stock. But David Berman still sees an investment opportunity
The rapid growth of the U.S. ETF market is triggering fears of a bubble
Desjardins’ chief economist believes there’s still a lot of upside ahead for the TSX, even while cautioning we could see rate hikes return at the end of next year
What’s up next
CPI on Tuesday is the highlight for domestic economic news this week. Economists expect a 0.1 per cent month-over-month decline for September. Retail sales data for August will be released Thursday, and economists predict a 1.0 per cent increase.
Domestic earnings reports include Waste Connections Inc. (US$1.367 per share expected) on Tuesday. Wednesday will see Teck Resources Ltd. ($0.544) and Whitecap Resources Inc. ($0.23) both report. Rogers Communications Inc. ($1.256) releases results Thursday and Celestica Inc. (US$1.472) announces profits Friday.
Down south the economic news begins with CPI for September on the 24th when economists predict a 0.4 per cent month-over-month gain. An initial look at durable goods orders for September will be released next Monday.
The U.S. earnings calendar is getting busy. On Tuesday we have Northrop Grumman Corp. ($6.492), Halliburton Co. ($0.495), Coca-Cola Co. ($0.782), Netflix Inc. ($6.934), and Intuitive Surgical ($1.99). Wednesday there’s Thermo-Fisher Scientific Inc. ($5.493), Honeywell International Inc. and Tesla Inc. (0.531). Procter and Gamble Co ($1.885) reports Friday.
See our full earnings and economic calendar here