After Strong Start to 2019, Toronto Stock Exchange Is Facing Headwinds

Is the Rally on the Toronto Stock Exchange Coming to an End?

The Toronto Stock Exchange (TSE) was one of the best performing indexes at the start of the year. After the best start to a year since 2000, the TSE continued to hit new highs on record profit forecasts. Despite the strong start to the year, fresh highs in late September, and investor optimism, the outlook for the fourth quarter looks exceptionally bearish.

The TSE started 2019 off with a bang, benefiting from the January Effect on steroids. By the end of May, the TSE had advanced 17.0%. Since then though, the TSE has traded in a tight range, and the outlook for the fourth quarter remains downbeat.

Most analysts expect the TSX to end 2019 at 16,940. That represents an impressive 18% gain on a year-over-year basis, but it’s just 1.7% ahead of where the TSE closed at the end of the third quarter. What does the future hold for the TSE?

Will the Trade War Upend the TSE?

There is a lot of ongoing uncertainty and large number of potential headwinds that could derail the TSE in the fourth quarter. There’s almost a sense of déjà vu. Last year at this time, the outlook for the TSE was bullish; then we entered the fourth quarter and the broader markets experienced a major rout, fuelled by then fears of the burgeoning trade war between the U.S. and China and weak earnings growth.

Fast forward one year and those same fears remain. The ongoing trade war between the U.S. and China is being blamed for weak economic data coming out of the two countries and the slowing global economy.

According to the most recent data, Canada’s economy is slowing. After four months of growth, the Canadian economy stalled in July, as the mining, quarrying, and oil and gas sectors contracted. The news, which was reported in early October, sent the Canadian dollar tumbling to $0.7524 U.S.

Could Third Quarter Earning Stall TSE Rally?

The earnings outlook for the third quarter of 2019 also remains bleak, with Canadian stocks feeling the pain of the U.S./China trade war and global economic slowdown.

The estimated earnings decline for the S&P 500 is -4.1%. If this is the final number for the quarter, it will be the first time the S&P 500 has reported three consecutive quarters of year-over-year declines since the fourth quarter of 2015.1

Of the 113 companies that have, so far, issued earnings per share (EPS) guidance for the third quarter, 82 (73%) have issued negative EPS guidance. That’s above the five-year average of 70%.

What Other Headwinds Is the TSE Facing?

The U.S/China trade war and weak earnings are enough on their own to upend the TSE in the fourth quarter. But there are many additional headwinds that could drag the TSE lower.

Weak oil and gas prices are taking their toll on Canadian equities, so much so that there is a serious lack of interest in Canada’s energy sector. As a result, the market cap of some of the country’s biggest and well-known natural gas and drilling companies have fallen below the threshold for being listed on the TSE.

There are other reasons why Canadian investors should be cautious over the coming weeks: U.S/China trade talks are resuming, the Canadian federal election, and the Bank of Canada will make its next rate announcement on October 30.

And that’s just in October; there are plenty of other factors that could negatively impact the TSE in November and December, like ongoing impeachment talks and fears of a recession.

Learn-To-Trade.com, Canada’s Leader in Stock Market Trading Courses

The TSE got off to a strong start in 2019, but it’s been trading in a mostly tight range over the last number of months. And the outlook for the fourth quarter remains bleak. Despite the uncertainty facing Canadian stocks, the trading professionals at Learn-To-Trade.com can teach you proven trading strategies that can help you profit no matter what the broader markets are doing.

Learn-To-Trade.com is the oldest and leading provider of stock market trading courses in Canada. Over the years, the expert traders at Learn-To-Trade.com have taught thousands of investors, of every skill level, how to trade more confidently and profit more consistently.

At Learn-To-Trade.com, we understand that investors have different needs, that’s why we provide a unique, Lifetime Membership that allows you to re-attend any part of the program as often as you’d like.

To learn more about Learn-To-Trade.com’s stock market trading course, contact us at 416-510-5560 or by e-mail at info@learn-to-trade.com.

Sources:

  1. “Earnings Insight,” Factset, October 4, 2019; https://www.factset.com/hubfs/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_100419A.pdf

Photo credit: iStock.com/ipopba

The following two tabs change content below.
George Karpouzis is the co-founder of Learn-to-Trade and has been personally providing education and mentoring to over 3000 members since 1999. George has been trading in the stocks, options, futures and forex markets using technical analysis since 1986. With the help of advancements in trading technology the Learn To Trade program is now accessible worldwide. His background and passion for teaching brings an invaluable asset to our members. George is constantly striving to improve the program content and develop new strategic relationships for the benefit of the members. Add me to your G+

Testimonial 1

Don’t hesitate jump into it right now. You will be glad you did!

Susan C

Learn To Trade
4.0
2014-08-19T04:45:40-04:00

Susan C

Don’t hesitate jump into it right now. You will be glad you did!

Testimonials 2

The ongoing support has been the reason for my success

Patrick L

Learn To Trade
4.0
2014-08-19T04:46:33-04:00

Patrick L

The ongoing support has been the reason for my success

Testimonial 3

I wanted to let you know that I had taken your course in the fall of 2013. I took your advice and used demo accounts for the last quarter of 2013. I switched to real money trading account in the Near Year, when I finally felt comfortable. Following the lessons taught to me by you (don’t jump on a moving train, peaks and valleys, EMA..etc), I wanted to let you know that I have been successful beyond my own expectations. Thank you very much – taking the Learn-to-Trade course was, by far, the best decision I made in my business career.

Steven R

Learn To Trade
4.0
2014-08-20T02:56:18-04:00

Steven R

I wanted to let you know that I had taken your course in the fall of 2013. I took your advice and used demo accounts for the last quarter of 2013. I switched to real money trading account in the Near Year, when I finally felt comfortable. Following the lessons taught to me by you (don’t jump on a moving train, peaks and valleys, EMA..etc), I wanted to let you know that I have been successful beyond my own expectations. Thank you very much – taking the Learn-to-Trade course was, by far, the best decision I made in my business career.

Joseph L

The past options and forex tutorials taught by George were very helpful. I find these tutorials invaluable for a busy person like myself. I was able to keep myself up to date and on track ready to continue the learning process. Thanks for all the help and keep up the great work.

Joseph L

Learn To Trade
4.0
2014-08-20T10:36:37-04:00

Joseph L

The past options and forex tutorials taught by George were very helpful. I find these tutorials invaluable for a busy person like myself. I was able to keep myself up to date and on track ready to continue the learning process. Thanks for all the help and keep up the great work.

Harley S

The course is amazing. Where were you 30 years ago?

Harley S

Learn To Trade
5.0
2014-08-20T10:37:39-04:00

Harley S

The course is amazing. Where were you 30 years ago?

Partick M

I learned the basics I needed to trade successfully.

Partick M

Learn To Trade
4.0
2014-08-20T10:38:34-04:00

Partick M

I learned the basics I needed to trade successfully.

Iouri G

I like making money. I’m very happy, so far so good

Iouri G

Learn To Trade
4.0
2014-08-20T10:39:27-04:00

Iouri G

I like making money. I’m very happy, so far so good

Akos B

I learned things it would have taken me years to figure out

Akos B

Learn To Trade
5.0
2014-08-20T10:40:05-04:00

Akos B

I learned things it would have taken me years to figure out

Robert B

There is always someone ready to answer my questions.

Robert B

Learn To Trade
4.0
2014-08-20T10:40:59-04:00

Robert B

There is always someone ready to answer my questions.

Uldus V

I was impressed with the course’s professionalism and enthusiasm.

Uldus V

Learn To Trade
5.0
2014-08-20T10:41:40-04:00

Uldus V

I was impressed with the course’s professionalism and enthusiasm.

Dean K

I wish I knew about trading as a business years ago!

Dean K

Learn To Trade
4.0
2014-08-20T10:42:24-04:00

Dean K

I wish I knew about trading as a business years ago!

Peter P

Learn to Trade provided me with strategy, self-confidence and discipline

Peter P

Learn To Trade
4.0
2014-08-20T10:42:57-04:00

Peter P

Learn to Trade provided me with strategy, self-confidence and discipline

Shelley P

I took your course in 2008 and loved it. Since then I have been using what I learned at Learn-to-Trade to nicely supplement my pension income. Wanting a carefree type of trading, I have for the most part just sold options and made a monthly income which is a nice addition to my pension. I know I never would have made this kind of trading income without Learn-to-Trade. Thank you!

Shelley P

Learn To Trade
5.0
2014-08-20T10:34:39-04:00

Shelley P

I took your course in 2008 and loved it. Since then I have been using what I learned at Learn-to-Trade to nicely supplement my pension income. Wanting a carefree type of trading, I have for the most part just sold options and made a monthly income which is a nice addition to my pension. I know I never would have made this kind of trading income without Learn-to-Trade. Thank you!

Amir

Hi George,

I just wanted to thank you again for the amazing work on the tutorials especially Options trading.   Prior to joining, I had underestimated the quality of the trainings but they certainly far exceeded my expectations. Only I wish I’d found you 5-10 years ago!

Amir

Learn To Trade
5.0
2016-10-07T08:56:52-04:00

Amir

Hi George, I just wanted to thank you again for the amazing work on the tutorials especially Options trading.   Prior to joining, I had underestimated the quality of the trainings but they certainly far exceeded my expectations. Only I wish I’d found you 5-10 years ago!

Linda S

It is so fun! It is like playing Chess for me. Readjusting my position/move as market reacts. He really enjoying it now (he said it is like going to candy store for him as there are so many options to pick for option strategy). He thinks he can make 100% return. We both really appreciate your program and your teaching! We would not able to trade in less than 2mths if it wasn't for your program!

Linda S

Learn To Trade
5.0
2019-09-04T14:23:05-04:00

Linda S

It is so fun! It is like playing Chess for me. Readjusting my position/move as market reacts. He really enjoying it now (he said it is like going to candy store for him as there are so many options to pick for option strategy). He thinks he can make 100% return. We both really appreciate your program and your teaching! We would not able to trade in less than 2mths if it wasn't for your program!
4.4
15