The shares of many of these steady but unexciting businesses have outpaced the broad market in recent months. Loblaw Companies Ltd.has gained nearly 18 per cent over those same nine months. Royal Bank of Canada has enjoyed a 24-per-cent advance.If nothing else, the market-thumping performance of these staid stocks shows how the narrative is shifting. A few months back, it was a handful of big tech companies – the Magnificent Seven – dominating investors’ thoughts and driving the market higher.
So should investors count on these trends continuing? A lot depends on what you think is driving the market’s change of heart. At least for now, the latter view seems more likely to be true. Consumer discretionary stocks – luxury goods makers, airlines, hoteliers and the like – are generally lagging the market, which is not what you would expect if people were positioning themselves for boom times. Meanwhile, gold and bitcoin – assets perceived as havens – continue to perform well. This, too, suggests investors remain nervous about what lies ahead.
Loblaw, Hydro One and Colgate-Palmolive are also selling for hefty multiples of their earnings and dividends. Meanwhile, financial institutions such as JPMorgan and Royal Bank seem fully priced after their recent run-ups.