42% of NYSE stocks hit a 52-week low today [so far!]. The emerging markets have been out-performing for a few weeks. The U.S. dollar is down against all significant currencies today – by more than 1% against the euro, yen and franc. Gold is up by 2%. With stocks down more than 2%, many semiconductor companies are up. And with stocks this quarter and this month down significantly against bonds, there will be a very large institutional re-allocation from bonds/cash to equities around year-end; this figure is currently estimated to be in the vicinity of $80 billion. The equity market should be bought.

Continue to steer clear of the ‘’avoid’’ issues, especially AAPL, FB, ORCL, TSLA, SBUX, YUMC. Recommended issues should be bought. Gold is breaking out to the upside and WPM, GG and related ETFs look like solid and very worthwhile short and intermediate-to-long-term investments regardless of environment that proceeds from here.

The semiconductor, semi equipment companies, and big-data/cloud companies present great entry points to participate in secular trends that are not going away. IBM is a very cheap stock that I would include here, though it is lower growth. Current best buys in data/cloud would be MDB, DOMO, ZS, SPLK. DATA, TWLO. All the recommended semis look to be good entry points. Add Intel INTC to list of attractive long-term semiconductor companies based of its announced new packaging breakthrough that allows for much lower power consumption, higher speeds, and more compact design solutions in multi-function, multi-chip requirements.

Abbvie is up 2% today on filing for new drug approval on their replacement for arthritis drug Humira. Again, this stock is very cheap on earnings and free cash flow and does not reflect many positive developments coming up in their pipeline or the prospects for recently launched drugs. A broad portfolio of smaller biotechs makes much sense also at this time.

Outside interest in the cannabis market has heated up this week with several deals done by AB Ambev [Budweiser], Altria, and pharma giant Novartis, joining Constellation Brands and Molson Coors. Given their more reasonable valuations and positioning in the U.S. market, I continue to prefer the Canadian-listed U.S. companies over the U.S.-listed Canadian companies that have received all the attention so far. The signing of the new farm bill today clears the way for big U.S.-listed companies to get involved with these U.S. cannabis companies to explore introduction of an array of CBD-based products.

John Stewart
Chief Investment Strategist

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