Sid Mokhtari, chief market technician at CIBC Capital Markets.Supplied
Heightened volatility in equity markets may persist for months, according to CIBC’s chief market technician Sid Mokhtari.
In a research report published on March 8, he stated, “It is our view that 2026 is a cycle year that should bring about additional volatility between now through to Q3 [third quarter] with stronger historical patterns in Q4”.
Mr. Mokhtari’s technical and quantitative models suggest investors maintain a defensive approach through a barbell strategy, which combines offensive and defensive stocks in a portfolio. His models have been successful at identifying trends and inflection points.
Mr. Mokhtari publishes a monthly report with his top 10 stock ideas. On the first business day of each month, The Globe and Mail reveals his monthly stock picks.
He screens and selects stocks from the largest 100 members by market capitalization within the S&P/TSX Composite Index. His technically driven stock recommendations have consistently outperformed the broader index across a wide range of market conditions.
In February, his portfolio of top picks rallied 9.79 per cent, topping the return for the S&P/TSX Composite Index by 2.22 per cent.
His disciplined process has delivered strong long-term returns. His stock selections have outperformed the S&P/TSX Composite Index for the past four calendar years.
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.
Given his call for near-term choppiness in equity markets, he has taken a balanced approach this month with his basket of top 10 stock ideas for March diversified across six sectors.
He increased the portfolio’s energy exposure to 40 per cent from 30 per cent and added Keyera Corp. (KEY-T), Paramount Resources Ltd. (POU-T) and PrairieSky Royalty Ltd. (PSK-T) to his portfolio. Peyto Exploration & Development Corp. (PEY-T) was carried over from the prior month. The portfolio’s second-largest sector exposure is materials with two stocks, CCL Industries Inc. (CCL-B-T) and Kinross Gold Corp. (K-T). In financials, Trisura Group Ltd. (TSU-T) was included in his basket of top picks. In consumer discretionary, Magna International Inc. (MG-T) was selected. In communication services, Rogers Communications Inc. (RCI-B-T) was added. Lastly, in the utilities sector, ATCO Ltd. (ACO-X-T) was selected.
On March 6, I spoke with Mr. Mokhtari and discussed where he sees investment opportunities.
For March, your portfolio favours energy stocks with a 40 per cent allocation to the energy sector. The price of oil continues to spike higher. Where do you see the price of WTI crude oil headed?
The breakout that we had over the US$70 level did measure closer to US$79 to US$80 on the first leg, which we reached and then we pierced through it.
The commodity is quickly becoming extremely overbought from a short and medium-term perspective. And considering that its longer-term trends are still declining trends, it is likely to experience a mean reversion lower.
Having said that, the fact that it’s gone up so quickly and sharply, purely technically speaking, the price of oil will have much better support on pullbacks. It’s unlikely to go all the way back down to where it was. So, it’s likely to stay above US$67 to US$70 for a while.
Will the price of oil hit US$100?
Even though it’s possible to get up there, given the magnitude of ascent, it’s likely to subside over time. Its sustainability is questionable.
A couple of energy stocks in your portfolio, Paramount Resources and Peyto, have rallied in recent days. Are they nearing overbought levels?
I think the entire sector is nearing overbought levels but given the directionality of the past 12 months, given that a lot of them are now printing positive alpha on a one month and one quarter basis, they are still the right choices from a sector allocation perspective.
Our model shows a preference for smaller caps and mid-caps, until recently with geopolitical events.
In February, technology was the worst performing sector in the S&P/TSX Composite Index falling 6 per cent.
All members of the TSX technology sector are down in excess of 20 per cent peak-to-trough.
When you decline by over 20 per cent, the recovery attempts become difficult, and it loses alpha.
Based on our own work, when a stock or a sector declines by over 10 per cent, it takes three to six months before alpha can be regenerated.
When a sector, collectively all stocks, declines by 20 per cent peak-to-trough, it is a sign of rotation.
We’ve seen that rotation very clearly both in the U.S. and Canada where there has been broadening out, away from technology and moving into cyclicals as well as commodity related areas.
I believe that we are in a late-stage cycle of these patterns that we’ve see in the past, when you see leadership of the market rotating in favour of commodities and related stocks. We’re seeing a rotation into hard assets and cyclicals.
We’re also seeing some evidence of money rotating into defensive areas, i.e., utilities and staples and by some measures REITs.
Let’s talk about financials. National Bank is now the top ranked bank stock in your matrix. Its share price rallied to over $190. What are your thoughts on that stock?
There are three banks that we favour in our matrix. We like National Bank, CIBC and BMO. They rank well in our matrix.
And because the sector is stretched, i.e., if you look at the BMO Equal Weight Banks Index ETF (ZEB-T), for instance, it was pretty stretched and likely to mean revert. So, we are suggesting to stay focused in banks that are stronger in our matrix relative to those that are relatively weaker in our matrix.
Bank stocks have had a good run.
Fundamentals are very good. We are looking at ROE [return on equity] expansion. We are looking at dividend increases. EPS [earnings per share] growth is running very well. They are no longer considered value stocks because of the rate of change of price that they’ve had. We also know they’re not being ranked as dividend yield stocks given how rich the price is relative to yield. So, they have become more about growth and momentum categories with a good fundamental backing. I think they still have a good place in trend following models like ours, alpha and relative strength models that we incorporate in our process.
Purely on a process basis, if you’re systematically aligned with models that we have, you should have exposure or at least stay in them. There’s no signal that is telling us you should exit.
For financial exposure, you selected Trisura instead of adding a bank stock to your basket of your top 10 best ideas. Why is that?
We run everything relative to one another, and those that are emerging and improving sometimes will have an upper hand over the ones that are leading and may be overbought and susceptible to mean reversion.
Trisura was a stock that is improving. And we have a preference for smaller and mid-cap stock so Trisura was added on that bias as well.
Did you want to give us your technical take on Trisura? When I looked at a five-year chart, the share price seems to hit resistance in the high $40s, and it can’t seem to break above $50.
Purely from a relative strength perspective, i.e. Trisura divided by the TSX or Trisura divided by the financials sector, over the past six to nine months, you are seeing a shift in its longer-term average and quarterly average that is supportive for Trisura.
But to your point, in absolute, the stock does have a technical ceiling. When you test the same level many times, it is a function of supply and demand changing hands. Previously, every time the share price went up towards that $44 to $45 level, it was hit with supply. When it comes down, it’s now being met with a lot more demand on heavier volume. So, I think Trisura is being accumulated and the stock is slowly shifting from a demand perspective that should be able to take it out of that upper range. I’m of the view that the stock should eventually be able to breakout of that upper band and project higher, which we technically measure closer to $53.
Gold is typically viewed as a safe-haven asset, yet amidst the turmoil in the Middle East, we haven’t seen the price of gold rally. What’s your technical take on gold?
Gold and silver may have seen a very sharp exhaustive pattern in the month of February.
I think gold and silver may be susceptible to a resting period.
For gold, we have a view that the upside is closer to $5,500, on the downside it’s closer to $4,800, and that’s a range where gold may be able to narrow its consolidation as we go into the summer and late summer when seasonality becomes better.
The S&P/TSX Composite Index is down by more than 1,000 points over the past few days. What key technical levels are you watching?
Technical levels on the downside are initially pegged against 32,500. The next bigger level is closer to 31,900 or call it 32,000. Those are the levels that TSX could fall to without altering its uptrend forces.
Are there other stocks in your top 10 best ideas portfolio that you want to highlight?
Telecoms recently have reemerged. BCE has a good technical bottoming pattern. Quebecor is a leading stock within the group. As well, Rogers recently cleared what’s called a ‘bull flag’, which is an uptrend continuation. These three stocks are nicely shown in our work in both absolute and relative terms. And if someone wants to have yield exposure as well as a barbell strategy, which I think is very prudent to do, these stocks are good options.
Rogers is the one that you added to your portfolio in March.
We chose Rogers because it’s not as strong as Quebecor, but we anticipate Rogers will be able to continue its strength in both absolute and relative terms.
What’s your target for Rogers?
We measured it toward $58 to as high as $61 on this “bull flag” resolution.
What investments would you currently recommend investors consider?
We use many ETFs that are associated with quant factors to see what style the market has or is entering.
We know that the market has lost a lot of its growth factors and a lot of growth stocks have fallen into our lagging quad.
In the past month to three months, we have seen a positive rotation in favour of quality, dividend yield, low volatility and value, and I think that is going to persist for a while.
We’ve talked about this before, this year that is likely to have more challenges given it is year two of the presidential cycle and it is year four of the bull market. These two cycles will give us opportunities as well as challenges. I think portfolios need to be barbelled and it is prudent to have a style tilted towards quality, value, low volatility and dividend yield.
What ETFs are ranking well right now?
Fidelity Canadian High Quality ETF (FCCQ-T) is at the top of our rankings - it is number one.
CIBC Qx Canadian Low Volatility Dividend ETF (CQLC-NE) has jumped by 15 points to number four in our rankings.
What ETFs are in the number two and number three spots?
Number two is Franklin Canadian Low Volatility High Dividend Index ETF (FLVC-NE).
The other one is CI Canada Quality Dividend Growth Index ETF (DGRC-T).
You can see the top ranked ETFs are tied to quality, low volatility and dividend yield.
What are the top ranked regional ETFs or ones whose rankings have increased?
I’ve seen this too many times, and it’s interesting because in previous conflicts in the Middle East, Isreal often comes right up to the top of the rankings. iShares MSCI Israel (EIS-A) is leading the charts in the number one position with a 10-point jump in delta.
The other ones that are also standing out to me are iShares MSCI Taiwan ETF (EWT-A), which is showing a 23-point jump in its delta and is ranked number five.
We favour Canada over the U.S. iShares MSCI Canada ETF (EWC-A) had a 41-point jump in delta and is now ranked number eight out of the 64 ETFs that that we screen.
It’s very interesting that the U.S., China and even India have all come down into my lower quad.
And I have Latin America, emerging markets, Japan, Canada and cyclical countries, they are in better quads and higher ranked in my baskets.
I have a question from a reader who asked, “Do you recommend an equal weight approach or market cap approach when investing in your basket of top 10 best ideas stocks?”
It’s always equal weight because it’s a very concentrated portfolio and because we selectively choose stocks that all effectively have a backdrop of trend and momentum, so it’s not that one should carry a bigger weight relative to the other. They all have certain characteristics where it’s best to be equal weighted.
In closing, is there anything else that you want to highlight to our readers?
Stay balanced. Even though things may look attractive given this pullback, we think it’s best to be patient.
This is a still a secular bull market, it’s rotating very nicely and it’s a late-stage cycle, so we may have challenges between now and the summer.
Historically, there are two waves of corrections in the current cycle. One would be in the first quarter through to the second quarter. The other one is typically defined in the third quarter.
I don’t think the secular bull market is being altered, but it’s just resetting itself for better opportunities as we go forward. And some time between now and the summer, we should be able to get a very good opportunity for bottom picking or see investment opportunities.
This Q&A was edited for clarity.