‘A regime that has changed’: CIBC’s Sid Mokhtari on why investors now need to have more money on the sidelines

‘A regime that has changed’: CIBC’s Sid Mokhtari on why investors now need to have more money on the sidelines JENNIFER DOWTY PUBLISHED 1 HOUR AGO COMMENTS SHARE SAVE FOR LATER Listen to this article Learn more about audio Log in or create a free account to listen to this article. Open this photo in gallery: Sid Mokhtari is the chief market technician at CIBC Capital Markets. SUPPLIED Today, the U.S. 10-year Treasury yield crossed above 5 per cent for the first time since 2007. Meanwhile, the Canadian 10-year Government bond yield is approaching 4 per cent. Rising bond yields combined with high oil prices, geopolitical tensions, tariffs and growing concerns surrounding AI development and the need for independent oversight and regulation are putting pressure on equity markets. But there may be a catalyst on the horizon. Earnings season kicks off in a few weeks, which could provide a tailwind for equity markets. According to a Sept. 18 report by LSEG I/B/E/S, S&P 500 (N/A ) earnings expanded by 53 per cent in the second quarter with earnings growth of 30 per cent anticipated for the current quarter. Analysis: As 5% U.S. Treasury yields lose shock value, investors start worrying about 6% On Sept. 18, The Globe and Mail spoke with CIBC’s chief market technician Sid Mokhtari to get his take on where equity markets may be headed and what sectors and securities may outperform. We are currently in a brief period of seasonal weakness. Consistent with historical trends, September is on track to deliver a negative return. Given the pullback in equity markets that we’ve seen in September, what does the technical setup look like for the fourth quarter? We think this is a bending condition, not a breaking condition. We believe that the setup is more of a mean reversion within parts of the market that have a high weighting in the S&P 500, and I’m going to use the S&P 500 as my proxy benchmark for the directional bias. Technology remains a significant relative outperformer when we look at the entire space collectively on an equal-weight basis, and the relative strength of technology is still showing good leadership but it’s bifurcated. In other words, investors need to be a lot more selective in their choices. The health care sector also has a high weighting in the S&P 500, 11 per cent plus, and it is also showing good relative leadership and durability. And then financials in the U.S., as well as in Canada, are still holding in quite well, irrespective…