This issue of Market Factors starts with an interesting stock picking strategy that appears to offer both upside opportunity and risk management. We move on to how the closing of the Strait of Hormuz may have acted as a catalyst for the equity market rally, and the diversion lauds a social media conspiracy debunker.
Stock picks
Triple momentum means upside potential
BofA Securities global quantitative strategist Nigel Tupper offered a solution for cautious investors who feel left out of the sharp, post-March 30 equity rally. In a Wednesday research report called Seize the Alpha, Mr. Tupper described a stock selection methodology based on what he termed Positive Triple Momentum (PTM) that balances upside potential with risk-sensitivity.
The report noted that conservative investors limiting themselves to low-risk (low beta, low volatility) stocks have not benefited significantly from the recent rally.
The strategist’s solution is to focus on companies with improving stock prices, earnings forecasts and news flow as these tend to be growth-oriented with strong positive correlations with rising markets. According to his analysis, these stocks have historically outperformed companies with negative triple momentum (NTM) for a period of 16 months, based on data going back to 2003.
The strategy is not risk-free but does account for potential loss of capital. The PTM stocks have shown a lower incidence of negative returns than the MSCI All Country Index over 12-month periods.
Mr. Tupper did not state it unequivocally, but he is inferring a pair trade with his methodology. He notes that the average 24-month return for investors holding positive triple momentum stocks has been 8.8 per cent since 2003. That average return jumps to 15 per cent for investors that both owned PTM companies and shorted NTM names.
The risk-limiting characteristics of owning PTM stocks is evident in average returns during both up and down markets. PTM stocks have averaged a 22 per cent annualized return in months with positive index returns and a loss of 6.0 per cent annualized during down months. NTM stocks averaged 18.0 per cent annualized in up markets and were down an average of 28 per cent annualized in down months.
The TSX is home to the two stocks with extremely high momentum rankings according to Mr. Tupper’s criteria: Teck Resources (TECK-B-T) and Celestica (CLS-T). U.S. names on the PTM list include Caterpillar (CAT-N), GE Vernova (GEV-N), AMD (AMD-Q), Intel (INTC-Q) and Ciena (CIEN-N). International stocks on the positive ledger include Denmark-based Vestas Wind Systems (VWSYF), Tokyo Electron (TOELF) and South Korea’s HD Hyundai Electric.
There is, unfortunately, Canadian representation on the NTM list in the form of First Quantum (FM-T), Ivanhoe Mines (IVN-T) and Shopify (SHOP-T). Prominent U.S. names on the NTM list include Lululemon (LULU-Q), NIKE (NKE-N), Toast (TOST-N), Carnival (CCL-N), Snowflake (SNOW-N) and Oklo Inc. (OKLO-N). International NTM companies include Adidas AG (ADDDF) and Spotify SA (SPOT-N).
Fishing boats sit idle on May 17, 2026 along the Strait of Hormuz in, on Qeshm Island, Iran.Majid Saeedi/Getty Images
Market rotation
Iran conflict drives assets to tech
Wells Fargo strategist Ohsung Kwon made the interesting point that the closed Strait of Hormuz was a catalyst for higher stock markets in recent weeks. He suggested that with the Strait closed, and macro concerns high, portfolio managers had no choice but to buy AI-related stocks that are somewhat insulated from economic factors. AI stocks represent a secular rather than cyclical growth story and are thus less dependent on global growth and reasonable crude prices.
ETF inflows to AI stocks as a percentage of the total are 2.7 standard deviations above pre-Iran conflict levels. Because these stocks have mammoth market caps and dominate the cap-weighted S&P 500, the benchmark has jumped higher.
Mr. Kwon remains bullish, just less so. He believes that AI investment will climb to 3.0 per cent of U.S. GDP eventually, similar to the railway boom of the 1850s, from current levels near 2.5 per cent. This will support a higher S&P 500.
At the same time, Mr. Kwon recognizes that AI capital expenditure is not completely immune from economic factors. If the megacap tech firms realize that slower global economic growth will also impede AI adoption, and thus a return on their massive investment, the data centre construction will be put on hold and a market correction becomes more likely.
There is no shortage of market risks in the second half of 2026. Prominent planned IPOs for Anthropic, Stripe and OpenAI, among others, will divert investor assets from current winners in the index. The Americans’ clown-driven federal leadership increases the odds of tampering with the midterm Congressional elections in the fall.
Both domestic and U.S. stock markets have bounced hard from the March 30 lows, albeit for different reasons, and it appears that volatility is ahead as markets digest the rally and reassess the outlook.
Dado Ruvic/Reuters
Diversions
Harebrained conspiracies get debunked
Jordan T. Lee is doing God’s work on Instagram, protecting society’s most gullible. Mr. Lee’s posts feature brief clips of the most fantastical conspiracy mongers - he accurately calls them grifters - and then succinctly and hilariously shows why the claims are laughably wrong.
One curly headed dude started his post with “there is no proof viruses exist” after which Mr. Lee said: “Not only do we have proof viruses exist, we have sequenced their genetic codes, grown them in laboratories, and taken thousands of high definition 3D photographs of them.”
Another account tries to stir the hantavirus pot by starting a post with “I’m curious, what does ‘hanta’ mean in Hebrew?” and shows a made-up translation of the word into “lie”. Mr. Lee responds, “Hanta isn’t a Hebrew word for lie … the medical term is derived from the Hanta River in South Korea where American and Korean scientists first isolated the virus in the late 1970s.”
There is another clip of a serious-looking interview set where the alleged host asks the guest why cardiologists are ignoring the positive effects of magnesium, as if there’s a conspiracy to keep this miracle substance down. Mr. Lee responds that “the claim that cardiologists don’t know about magnesium is like claiming a mechanic doesn’t know about oil. They aren’t ignoring it, they are already using it to save lives every day.”
Mr. Lee’s account is a palliative for the intense frustration I feel watching people tell outright lies to sell products or themselves. The audience tends to be intellectually desperate for any simple explanation for a complex world and conspiracies provide easy scapegoats.
The essentials
Looking for our updates on market movers, analyst actions, stock technicals, insider trades and other daily, weekly and monthly insight? Click here to visit our Inside the Market page.
Globe Investor highlights
Pet Valu is looking like a dog. But David Berman sees a bull case to be had.
CIBC’s chief market technician, Sid Mokhtari, answers Globe readers’ questions on topics ranging from top income investments to his favourite U.S. stocks
Investors see no let-up in bond market strain. But is the futures market getting ahead of itself on U.S. rate hikes?
Mike Dolan points out that bond yields may finally be baking in an AI world
Quick hits
The University of Waterloo is a powerhouse in finance. A team from its School of Accounting and Finance recently beat out finalists from California State Fullerton, Peking University, Shanghai Jiao Tong University and the University of Ljubljana to win the CFA Institute Research Challenge. Each team is assigned a public company to research. The Waterloo team was assigned Montreal-based Lightspeed Commerce (LSPD-T) and the team eventually rated the stock a sell and successfully defended their analysis. Waterloo’s reputation continues to grow - its technology engineers are annually fought over by Silicon Valley firms.
BofA Securities held a global mining conference last week and day two featured discussions with executives from Adamas Intelligence and MP Materials, two rare earth producers. Neodymium Iron Boron magnets are at the centre of the rare earth shortage and both companies are providing them. Management from Adamas expects the price of these magnets to jump from roughly US$50 per kilogram now to $150 in the medium term. Demand from robotics and plug-in hybrid vehicles is the primary driver.
It’s beginning to look a lot like 1996. Chip designer Cerebras Systems had an IPO price of US$185 and started trading at US$350. The issue was 25 times oversubscribed, according to Sherwood Media’s new Entrypoint newsletter. Good friend and former Report on Business (also Bloomberg and UBS) writer Luke Kawa co-writes Entrypoint.
Read this week’s earnings and economic calendar here