November has been a volatile month for equity markets.
The S&P/TSX Composite Index experienced intraday swings of more than one per cent between Nov. 21 and 25. Meanwhile, the Nasdaq Composite has posted intraday moves exceeding one per cent in six of the past nine trading sessions. Major North American equity markets sold off sharply but have since rebounded to record or near-record levels.
To better understand what this volatility may signal for the remaining month of 2025 and early part of 2026, I spoke with Javed Mirza, Managing Director of Quantitative/Technical Strategy at Raymond James. Below are highlights from our November 26 conversation.
What does the technical setup look like for the months ahead for North American equity markets?
We see the potential for an 8-10-per-cent equity market correction, which in our work marks the transition from phase one to phase two of the market cycle model. This market cycle model essentially is how we track the business cycle, and phase three is typically the market peak. We think that market peak is going to occur sometime in the second half of 2027, first half of 2028.
What do you mean by phase one and phase two?
This is very much an art more than a science.
Each distinct phase can last, call it six to 16 months.
What we’re looking for is an eight to 10-per-cent corrective phase, which is essentially portfolio managers rotating out of phase one plays and into phase two plays.
Phase one plays are very cyclical, so consumer discretionary and information technology stocks.
And phase two is more pro-economy-sensitive, so basic materials, industrials, those kinds of areas of the market. It’s when the economy’s really humming. For instance, it’ll be something like lumber. As people get more comfortable with the economy, they’ll feel much more comfortable buying a home, which will lead to people shopping at home retailers and buying new houses, and it has widespread effects.
So where are we now? Are we transitioning from phase one to phase two?
I think so. I think April 8th marked a broader market low, and from April 8th until now, we’ve been in phase one. We’re just waiting for that transition into phase two.
From your analysis, what major indices have the greatest upside potential?
If we’re in a traditional cycle and given that we’re in a secular bull market in equities that we think began in 2011, information technology has been the leader, so it should continue to be the NASDAQ 100.
However, over the last couple of quarters, we’ve seen basic materials pick up, especially precious metals. If we continue to see the TSX strengthen and outperform the S&P 500, historically, when you’ve seen extended periods of outperformance by the TSX, it typically heralds a shift into an environment that favours hard assets over paper assets.
And what are your technical targets for these indices?
Most of our work is on the S&P 500, so we don’t have a target for the TSX. For the S&P 500, our 2026 year-end target is 7,940.
Earlier, you indicated that we may see sector leadership from basic materials and industrials.
Yes, phase two typically sees ongoing sector leadership in information technology, industrials and basic materials.
Within the materials sector, gold stocks have outperformed in 2025. Will that positive momentum continue?
Gold looks strong technically. It looks like it’s reaccelerating here.
But, if we see a shift into phase two, which is what we’re anticipating, I think some of the cyclical basic materials should begin to shine such as lumber, which has been under a lot of pressure, as well as copper and rare earth metals.
How do you select stocks?
Typically, we look at four indicators when selecting stocks for either adding or reducing exposure: price momentum, relative strength, price action and volume.
What’s the difference between price momentum and price action?
So, price momentum tells you the strength of the trend and where it’s headed. Price action will help identify inflection points.
Do you have a few Canadian stock ideas for investors?
In a research report, we highlighted tax-loss harvesting ideas and among them were FirstService (FSV-T) and CGI (GIB-A-T). They have been under pressure, but it looks like a positive technical inflection point is developing right now. Both are rated “outperform” by our fundamental analysts.
Do you have a few investment ideas for investors who want U.S. exposure?
If we’re correct on where we are in terms of shifting into phase two, then U.S. homebuilders should be a beneficiary of broader economic strength.
Is there anything else that you believe is important to highlight to our readers?
Utilize this intermediate term, one-to-three-month correction in equity markets, as an opportunity to add exposure for this new four-year cycle that we think began at the April 8th market lows. If we’re correct on our longer-term cycle work, equity markets should have upside into the second half of 2027, first half of 2028.
This Q&A has been edited for clarity.