Sid Mokhtari, chief market technician at CIBC Capital Markets.Supplied
July has been a challenging month for many investors marked by a steep selloff in growth and momentum stocks.
Investor sentiment fell sharply.
On July 29, the weekly AAII investor sentiment survey showed a steep decline in sentiment with only 31 per cent of respondents maintaining a bullish outlook for the stock market over the next six months, down from 45 per cent reported in mid-July.
That day, the Cboe Volatility Index (VIX) spiked above 20, reflecting heightened investor fears. Investors are navigating multiple headwinds including a rising interest rate environment, inflation concerns, tariff threats and geopolitical risks.
On July 25, The Globe and Mail spoke with CIBC’s chief market technician Sid Mokhtari to get his take on the volatile and shifting market dynamics and which securities may emerge as new leaders.
Mr. Mokhtari is a seasoned industry veteran with a successful track record.
He produces a monthly report with his top 10 stock ideas. The Globe and Mail lists his stock picks in a report published on the first business day of each month.
His technically driven stock recommendations have consistently outperformed the broader index across a wide range of market conditions. In 2025, his portfolio of stock selections rallied 51.3 per cent, compared to a 28.3 per cent price return for the S&P/TSX Composite Index. His stock selections also outperformed the TSX Index in 2024, 2023 and 2022 by 5.8 percentage points, 6.3 percentage points and 2.7 percentage points, respectively.
Here are his recommendations on how investors can position their portfolios in these turbulent markets.
July has been a volatile month for many stocks. With just a few trading sessions left in the month, how are the stocks in your basket of top 10 picks for July performing? Any positive or negative standouts?
We may have transitioned into a late cycle environment, which is associated with inflationary forces and eventually a higher rate environment. And that is buoying insurance names like Sun Life (SLF-T), Manulife (MFC-T) and Great-West Life (GWO-T). We have exposure to Manulife.
Month-to-date, our basket of top picks is up over 3 per cent, adding over 150 basis points of alpha.
Looking forward, August and September are historically weak months for the TSX Composite Index and the S&P 500. Based on current technical trends, would you say that history may repeat itself this year? What’s your outlook?
The number of constituents in both the S&P 500 and the TSX Index that are beginning to fall below the 20-day moving average is increasing. Short-term indicators are becoming weaker as we go into the softer seasonality period of the year.
Even though history doesn’t have to repeat itself, it will probably rhyme by some measure, so it is prudent to have a way of protecting ourselves from that seasonal backdrop.
We are seeing dividend yield, low volatility and value styles rise in our models shifting away from growth and momentum.
So will growth and momentum stocks underperform in the second half of 2026, or will strong earnings reports support these stocks?
Numbers have been great from the technology sector, but stocks are not performing. Intel (INTC-Q) came out with great numbers, but we did not see enough follow through. It may be that a lot of good things are already priced in.
Growth is a very dominating factor when we run our historical secular bullish narrative. Over 30 per cent of the S&P 500’s driving force of alpha comes from a technology backdrop – that is a driving force of the growth narrative. So, it’s very difficult for me to walk away from growth because I still see a bullish secular narrative for the S&P 500, which will trickle down to the TSX Index as well. But growth may consolidate and pause. I don’t necessarily think that we will lose growth.
We have not seen money exiting equities in a big way. We are seeing a rotation within styles.
Semiconductor stocks were leaders in the first half of this year but many of these stocks as well as ETFs such as VanEck Semiconductor ETF (SMH-Q) and iShares Semiconductor ETF (SOXX-Q) have corrected sharply in July. Are they due for a snapback or do you see further downside risk?
I don’t think we have seen enough of a correction within semis.
Since April and May, irrespective of the fact that SMH managed to make new highs, we have had very notable declining stochastic and momentum factors, particularly from a volume perspective. Every time we saw selling, volume was heavy.
And then from a pattern perspective, some may argue that semis have exhibited a head and shoulders pattern. In the near term, SMH, for instance, had a neckline breakdown around US$580. We’re below that US$580 level. Semis may correct further, which may bring about more pressure within the technology space.
With SMH breaking below US$580, how much further downside do you see?
The measured move for it would be closer to about US$480, US$460, and that that can be painful.
This will be a corrective retracement and not necessarily an alteration of a longer-term uptrend. It will bring you right back to the rising 200-day or 40-week moving average that is still secularly positive.
A technology stock that a lot of investors will be watching closely this week is Apple (AAPL-Q), which reports its earnings after the close on July 30. In your matrix tables, it’s the No. 1-ranked stock in the NASDAQ-100.
And it’s not just No. 1 in our matrix on the NASDAQ-100. When we run value models and quality models, Apple comes up as a top-ranking name. A measured move for Apple is closer to US$362, US$365 so I still think there’s upside.
This is a market that is favouring quality and value, and Apple certainly fits in that bucket.
You screen over 60 thematic ETFs. What trends are you seeing?
I regularly speak to our fixed income team as well as our currency team and we are in sync with one another believing that rates are probably higher for longer.
If that’s the case, we are probably going to have more subdued price action from growth stocks and better performance towards value and quality.
We’re seeing healthcare, biotech, and pharmaceuticals coming up in the ETF rankings. Technically, we should be focused on those areas. Now, whether or not fundamentals are supportive – that’s a different argument. I know that fundamentals are not broadly supportive of healthcare areas, but technical models are still supportive of biotech, pharmaceuticals and healthcare areas.
Energy is coming up. Financials are showing quite well. Insurance stocks are also showing very well along with ETFs with cyclical exposure that benefit from an economic growth environment. And that’s why the Fed may be prone to hike rates because the economy is doing well, which would benefit industrials and transportation stocks.
Could you give readers an update on your global ETF scorecard?
Based on our rate outlook, emerging markets may be susceptible to pressure because of a stronger U.S. dollar.
Today, we are seeing iShares MSCI Thailand ETF (THD-A) in the number one position in our models. The Japanese market remains one of the stronger areas. And we’re seeing Poland coming up.
Generally speaking, I would say iShares MSCI EAFE Value ETF (EFV-A) fits very well with rotation to value. Dimensional International Value ETF (DFIV-A) has also been coming up in our rankings. Both ETFs are ranking quite well.
Speaking about strength in the U.S. dollar, is the Canadian dollar going to fall below 70 cents or will it be able to hold above that 70 cent level?
I think it will be able to hold.
The Canadian dollar is probably going to be at 72 cents or lower for quite some time.
Is there anything that we didn’t discuss that you want to highlight to readers?
The magnitude of breadth below the short-term averages is beginning to increase, and that’s very concerning in the near term.
And it is lining up with the weakest seasonality window too.
I am mindful that we are seeing some elements of near-term pressure that may cascade out to areas that are still holding in well. It’s premature to make that argument, but that’s how things begin to evolve.
It’s a weak seasonality period beyond July into September and October. It is the year four of the bull market. It is year two of the presidential cycle. There are midterm elections. So, volatility is naturally going to be a question mark for a lot of investors. It’s best to have some level of protection as we go forward. It is prudent to be very cautious as we go forward.
What styles or factors would you recommend for portfolio protection?
I think that it’s best to be somewhat exposed to low volatility and value stocks.
And I think investors should look for compounders for the next little while because they are likely able to withstand what may come from higher rates and market volatility with style shifts.
Compounders are typically associated with companies that can withstand pricing pressure. They set prices and dominate competition. There are barriers to entry. They also have balance sheet strength, strong ROE (return on equity) and ROIC (return on invested capital), and they continue to grow their businesses.
We have a model that shows who the Canadian compounders are. Rails are there. The number one compounder from a quality perspective is Constellation Software (CSU-T), but it’s been under pressure. It has a very strong ROE and ROIC. The second-best name is Dollarama (DOL-T). Alimentation Couche-Tard (ATD-T) has a strong ROE and ROIC combined with a very strong quality backdrop. We’re also seeing Stantec (STN-T) and TFI (TFII-T) followed by Intact Financial (IFC-T).
We have seen compounders come under pressure, but I have CN (CNR-T) and CP (CP-T) coming up in our baskets along with Brookfield Asset Management (BAM-T) as well as Brookfield Corp (BN-T).
What key message did you want to leave with readers?
Investors will need to exercise a lot of prudence in the next few months. I believe as we go forward, sentiment will be a lot more hawkish for higher rates, and that will mean tighter liquidity. And when liquidity is tighter, the stock market is not going to like it.
This Q&A has been edited for clarity.
