November Market Update

Money is a tool. It's there to support your life!

This month's update has a lot to offer! We share the 2025 Federal Budget Review, a great article explaining the continuing growth in the market, and a deep dive study into why our money simply doesn't stretch as far is it used to. 

We share our portfolio performance and the trades we've done in October, along with Stephen's Technical Market Comments. 

There is a lot to read below and we encourage all of our clients to ask us questions or ask for clarification on anything we post. 

 

We are always happy to help!

 Portfolio Management Comment

November 3, 2025

8:56 AM

Jurrien Timmer – Report

Jurrien Timmer, Director of Global Macro

Jurrien Timmer (@TimmerFidelity) · X

Make hay while the sun shines

It has been a bountiful year so far, despite the tariff tantrum in the spring which produced a scary but short-lived 21% drawdown. Back then we were worried about a dark turn in the global world order, in which the dollar and Treasuries were no longer safe assets and the US would lose its supremacy premium. While all those things may still happen, for now investors have found more bullish fish to fry.

The combination of a less-bad-than-expected trade policy combined with a large fiscal impulse (OBBB), an accommodative Fed, a quiet bond market, and a juicy AI narrative that promises great things which are hard to quantify, is a potent cocktail for the markets.

The result, year-to-date as of November 2, is a leaderboard that only has winners on it, ranging from REITS at +3.1% to bonds at +6.8% to Bitcoin at +16.8%, the S&P 500 at +17.5% to international equities at +25-34% to gold at +52.5%.

The bountiful harvest in 2025 is year 16 of a bountiful secular period of above-average returns. Secular trends by definition don’t happen often, given that they tend to span a few decades, and by my count this one is getting to its later innings. Make hay while the sun shines, the saying goes. For investors that means harvesting double-digit betas while the market gods smile down at us.

Whether the AI boom becomes the final act the way the internet boom did 25 years ago remains to be seen, but some day the harvest might be less bountiful and the hay will be harder to make. So, make the hay while the harvest is bountiful.

Earnings season

With 318 companies reporting (and 83% beating estimates by an average of 496 bps), Q3 earnings season has been a winner so far. The expected growth rate for Q3 earnings started out at +7% yoy but has quickly jumped to +13%, in line with the last few quarters.

This Q3 bounce has brought the expected growth estimate for calendar year 2025 up to +11.2%

The dollar estimate for Q3 has now jumped $4/share from $67 to $71. The past few quarters have produced a sharper “hook” than average.

The boom in capex has been a major feature of this market cycle, and the chart below shows just how big it is. Capex as a percent of revenues/share has grown from 5.5% in 2022 to 6.9% in 2025. That may not seem that impressive, but revenues have grown from $1,326/share to $1,935/share. That means that capex/share has nearly doubled in three years, from $72.9/share to $133.5/share.

The market cycle

The current phase of the market cycle is being powered by earnings growth, which is a good thing. Valuation did all the heavy lifting in 2023 (when earnings fell 2%) and amplified a healthy earnings advance in 2024, but have taken a back seat in 2025.

Valuation

That’s not to say that valuations aren’t lofty. Far from it. The 5-year CAPE ratio is now at 31.5x, which is the highest since the internet bubble burst in 2000.

While the cap-weighted P/E ratio is in the upper percentiles of history, the median P/E remains fairly well behaved at 18.4x. The average stock is not over its skis at all.

Mag 7

The Mag 7 continues to dominate, and its earnings estimates are re-accelerating once again.

One look at the earnings estimates of the Mag 7 and the other 493 stocks shows how justified their outsized performance has been. Since 2022, the Mag 7 is up 4-fold and its earnings are up 3-fold. Valuations are up there at 36x, but earnings have been the dominant driver.

Concentration risk

However, that success carries risk in the form of concentration. If those seven stocks ever go down, at 36% of the S&P 500 they will drag the index with them. That will be a problem for investors owning equities through passive index exposure. The same thing happened in 2000-2002 when the “Janus 20” dragged the S&P 500 index down 53% while the average stock did OK. The market gods giveth, and they taketh away. Harvest those betas while the getting is good because some day they will be less plentiful.

The chart below shows that the market has narrowed again in recent months, with only 28% of the stocks in the index outperforming. These are the same levels of concentration seen in 2000 and 1973. Both periods eventually led to a long string of lean years for the index (but ample years for stock pickers).

A hedge against concentration risk

I continue view non-US equities as powerful barbell hedge against US concentration risk. The chart below of the MSCI EAE index shows that its relative performance against the equal-weighted S&P 500 index is very strong. In other words, international equities are handily outperforming the average US stock, but we can’t see it because the Mag7 is taking the index to levels that we wouldn’t otherwise see. If the wine ever turns to vinegar, ex-US equities will be a good place to harvest alpha.

Especially the EAFE index is quite competitive on the fundamentals, even against a top heavy cap-weighted US. The scatter plot below shows that the MSCI US index has a 75% payout ratio (dividends + buybacks as a percent of earnings) and sports a 5-year CAGR of 8% for that payout. But it cost a hefty 23 times expected earnings. The MSCI EAFE index has a similar 74% payout ratio, a superior 11% payout CAGR, and only costs 15x.

And while the cap-weighted valuation in the US (measured by the implied equity risk premium and P/E) is all the way at the tail, the EAFE valuation is smack in the middle. It’s a rich opportunity set now that the fundamentals have caught up, and hopefully a good hedge against US concentration risk. If and when the beta becomes scarce, we will need to harvest all the alpha we can get.

Late innings

Is the secular bull market reaching its later innings? By my count, yes, but with a sample size of three, measuring secular trends is anything but an exact science. Many technicians see the current secular regime as starting in 2013, and I hope they are right, but I find 2009 to be the more compelling analog from the perspective of slope, deviation from trend, and starting valuation (CAPE model).

A whimper or a bang?

The secular bull market of 1949-1968 ended with a whimper (inflation) and the 1982-2000 bull market ended with a bang (internet bubble). How will this one end, whenever it does? Until this year I would have thought the 1960’s was the most compelling analog, but with the current AI boom driving the bus, perhaps the late 1990’s is the better analog.

Bubble watch

My analog chart below continues to track perfectly, which puts us somewhere in the spring of 1999. If the 2022 bear market and subsequent soft landing was analogous to 1994 and 1995-1997, then the 2025 phase of the current bull market looks like 1998-1999. A sharp but short-lived drawdown followed by a high momentum rebound, with some rate cuts sprinkled on top.

As the chart suggests, if a bubble does become the final act of this secular bull, things are going to get very interesting in the coming months. Of course, analogs are great until they no longer work, so that is a big caveat when looking for history to rhyme the way I am doing here.

The Fed

The Fed lowered rates last week as was widely expected, but Chair Powell threw cold water on expectations that another cut is a given for December. At 3 7/8 percent, in my view the Fed is now in the neutral zone. The Fed’s view of neutral is 3% (2% inflation plus 100 bps of R-star), which seems low to me given that inflation is 3% and proving very sticky.

Truflation

A real-time inflation series called Truflation (a daily blockchain-based market measure of inflation) is rising at only a 2.5% annual rate, which is closer to the Fed’s long-term inflation target of 2.0%. So that’s promising and suggests that perhaps the Fed does have more room to get closer to what the market expects the terminal rate to be (3.1%).

QT no more

With last week’s rate cut also comes the end of the Fed’s balance sheet reduction (QT). The Fed’s reverse repo facility (RRP) is now depleted and the Treasury’s cash balance (TGA) has grown to $1 trillion. That’s a robust cache of “fiscal QE” waiting to be deployed. I’m not sure why the TGA is so high, but I’m sure Treasury Secretary Bessent has a reason!

Gold

The price of gold continues to work off what in retrospect looks a lot like a blow-off that was not quite justified by the rise in liquidity. An extended period of churn like we experienced earlier this year seems likely here.

With gold and Bitcoin being (in my view) different players on the same team, my guess is that Bitcoin may pick up the slack here. The two Sharpe Ratios have been moving in opposite directions for some time now.

The chart below shows that Bitcoin is indeed becoming a more mature and less precocious asset class, with the slope of its current uptrend (since 2022) now just a “normal” exponential one instead of the parabolas that were produced in bitcoin’s earlier days. Here is to adulthood!

Our Portfolio Management Approach

*Hopefully everyone has a chance to listen to our podcasts. Stay tuned for a whole new podcast coming soon!

We are fundamental investors that use technical analysis to manage short-term market risks. We believe that risk management is not a choice, but a necessity. While we cannot control how much downside the market provides during a correction, we can control how much of the downside your account receives. We aim to avoid 60% or more of the decline in any significant downturn. Without our process, there is a good chance you will experience 100% of the downside from the market. We will help you navigate the risks and rewards of the market so that you can stop worrying about your money and start living your life.

 

Transactions

The following is a chronological list of the trades:

 

Added to our TMX position

Sold our GLD (gold) position. 

Entered the position at $317.21 and sold all at $390.32.

Trimmed our position in Franco Nevada. 

Bought 3% position at $237.18 and sold half of the position at $306.86.

Why?

It has been massively overbought.

Sold all of The Travelers. Bought at $228.10 and sold all at $261.02

Trimmed our position in Hudbay Minerals. Bought a 3% position at $14.35 and sold half at $23.45.

Returns on our 60/40, 70/30 & 80/20 Portfolios, before fees:

 

Interesting Charts

A little perspective on the tech world; Nvdia, Microsoft and Apple are each bigger in cap than every company in the TSX index:

This past year it's only been about technology and communication services:

 

It's that time of year again:

 

10 stocks are making up 40% of the S&P 500 index:

Technical Comment

https://www.brookstradingcourse.com/analysis/7-bar-e-mini-bull-microchannel/

 

Market Overview: S&P 500 E-mini Futures

The market is forming a 7-bar E-mini bull microchannel breaking above the 6900 level. The next targets for the bulls are the 7,000 and 7,100 levels. If there is a pullback, the bulls expect at least a small second leg sideways to up to retest the trend extreme high (Oct 29). The bears will need consecutive bear bars closing near their lows to show that they are regaining control.

The Monthly E-mini Chart

• The October monthly E-mini candlestick was a bull bar closing in its upper half, with prominent tails above and below.
• Last month, traders were watching to see if the bulls could create more follow-through buying and close October as a strong bull bar, or if the market would trade slightly higher but start forming long tails above or candlesticks with bear bodies (which have not appeared since the April low).
• The market traded lower early in the month, but there was no follow-through selling. It made a new all-time high, but closed off its high during the final days of October.
• The bulls created a 7-bar bull microchannel, showing persistent buying pressure.
• There may be buyers below the first pullback from such a strong microchannel.
• The bulls reached and exceeded the 6,900 round number target in October. Their next targets are the 7,000 and 7,100 levels.
• If there is a pullback, they expect at least a small second leg sideways to up to retest the trend extreme high (Oct 29).
• If a deeper pullback lasting several months develops, the bulls want the December high or the 20-month EMA to act as support, forming a major higher low.
• The bears want a reversal from a large wedge top (July 27, December 6, and October 29) and see the rally as climactic.
• The problem for the bears is the lack of strong bear bars with follow-through selling.
• They will need consecutive bear bars closing near their lows to show that they are regaining control.
• So far, the move up from the April 7 low remains strong, with a tight 7-bar bull microchannel and consecutive bull bars closing near their highs.
• While the rally appears climactic and overbought, traders will only be willing to sell aggressively when they see the bears can create strong bear bars with sustained follow-through selling.
• There may be buyers below the first pullback following the 7-bar bull microchannel.
• Given the climactic nature of the rally, the odds of a minor pullback are increasing. It could begin within the next couple of months.
• For now, traders will watch to see if the bulls can create additional follow-through buying toward the next round numbers, or if the market will begin to stall, followed by a minor pullback instead.

Millennial Minute

As the end of the year gets busier for the team, Ashley's Millennial Minute is taking a small hiatus. HOWEVER! She still has information that she reads and enjoys sharing it with others. 

PSST! There's also a new podcast in the works! Stay Tuned!

Canada's Affordability Divide: How the 1%'s rise left millions behind - Click here to read!

Authored by: Silas Zuereb

Date: March 11, 2025

It’s no secret that many countries are facing an affordability crisis. We see it in the US, we see it in the UK, we see it at home, and the future looks like it will just be a continuation of the present. Faith is being lost in our systems of government as the middle class slowly disappears while we try and budget our way out of a large and un-budgetable problem.

While this month’s article is taken from a non-profit and non-partisan advocacy group, the ideas given tend to coincide with the ‘left’. However, I challenge anyone who reads this to leave their political position of right or left aside, and see the issue that more than 90% of Canadians are currently facing as a human issue, not a ‘left or right’ issue.

PLEASE NOTE: This article does not represent the views of BMO or BMO Nesbitt Burns or the Biddle Johnston Team as a whole.

 

Planning Article

The Federal Budget Review - Click here to read!

On November 4, 2025, Finance Minister François-Philippe Champagne tabled the first federal budget entitled “Building Canada Strong” under Prime Minister Mark Carney’s leadership – a budget that arrives at a pivotal moment for Canada. Against a backdrop of global economic and trade uncertainty, rising geopolitical tensions, and domestic affordability challenges, Budget 2025 was expected to chart a course that balances fiscal prudence with investment.

 

DISCLAIMER:

The opinions, estimates and projections contained herein are those of the author as of the date hereof and are subject to change without notice and may not reflect those of BMO Nesbitt Burns Inc. (\"BMO NBI\"). Every effort has been made to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions that are accurate and complete. Information may be available to BMO NBI or its affiliates that is not reflected herein. However, neither the author nor BMO NBI makes any representation or warranty, express or implied, in respect thereof, takes any responsibility for any errors or omissions which may be contained herein or accepts any liability whatsoever for any loss arising from any use of or reliance on this report or its contents. This report is not to be construed as an offer to sell or a solicitation for or an offer to buy any securities. BMO NBI, its affiliates and/or their respective officers, directors or employees may from time to time acquire, hold or sell securities mentioned herein as principal or agent. BMO NBI -will buy from or sell to customers securities of issuers mentioned herein on a principal basis. BMO NBI, its affiliates, officers, directors or employees may have a long or short position in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. BMO NBI or its affiliates may act as financial advisor and/or underwriter for the issuers mentioned herein and may receive remuneration for same. A significant lending relationship may exist between Bank of Montreal, or its affiliates, and certain of the issuers mentioned herein. BMO NBI is a wholly owned subsidiary of Bank of Montreal. Any U.S. person wishing to effect transactions in any security discussed herein should do so through BMO Nesbitt Burns Corp. Member-Canadian Investor Protection Fund.

BMO (M-bar roundel symbol)” is a registered trademark of Bank of Montreal, used under licence.