Markets have continued to move higher, but this week we focused on an important shift beneath the surface: leadership is narrowing, breadth is weakening, and this is becoming a more selective environment.
We continue to view the long-term backdrop as constructive. At the same time, we are paying close attention to the signs that risk is rising in the near term. Fewer stocks are participating in the rally, long-term interest rates have moved higher again, and inflation-sensitive areas such as energy, metals, and other commodities remain firm. That mix tells us this is not a time to press on risk simply because the headline indices are holding up.
Our approach remains grounded in process. We want to stay with areas where the trends and fundamentals are still strong, including energy, financials, industrials, materials, and select international markets. We also continue to see Canada as one of the stronger equity markets globally. On the other hand, we are cautious about weaker consumer areas, defensive sectors that are not attracting leadership, and parts of technology that look crowded or stretched in the short term.
As we move toward summer, we think patience matters. Holding some cash, staying disciplined with stop losses, and waiting for broader participation to improve gives us flexibility. Sometimes the best thing to do is nothing, especially when the long-term trend is still intact but the short-term setup calls for more selectivity.
Key Takeaways
The Bull Market Is Still Intact
We continue to see a constructive long-term backdrop for equities. While the path may be less smooth in the near term, the broader trend remains positive and supports staying invested with discipline.
Market Leadership Is Narrowing
One of the main themes this week was the growing divide beneath the surface of the market. A smaller group of stocks is doing more of the lifting, which makes broad headline strength less reassuring than it may appear at first glance.
Inflation Pressures Are Still Present
Commodity strength, firm energy prices, and rising long-term bond yields all point to inflation remaining an important part of the market backdrop. That continues to shape where opportunities and risks are showing up.
Leadership Remains Outside the Weakest Areas
We continue to see stronger leadership in areas such as energy, financials, industrials, materials, Canada, and select international markets. These are the parts of the market where trends and relative strength remain more constructive.
Higher Yields Are Changing the Investment Landscape
Rising long-term interest rates matter, especially for expensive growth stocks and more interest-rate-sensitive areas of the market. This environment continues to reward quality, strong balance sheets, and businesses with durable cash flow.
This Is A Time To Stay Selective
As we move into a seasonally tougher stretch of the year, we think patience and discipline matter. Rather than chasing what has already run, we are focused on picking our spots carefully, managing risk, and keeping flexibility for better opportunities ahead.