Paradigm Capital analyst Aazan Habib said the global equity bull market that began in 2023 is continuing to broaden across regions and market caps, supported by favourable liquidity trends and strengthening risk appetite, though some short-term consolidation is likely as major technical targets are approached.
In his Oct. 1 technical report, Habib said the “big picture view remains bullish,” citing positive money supply growth, peaking real yields, and steepening yield curves as key macro tailwinds. Credit spreads are tightening, implied volatility is compressing, and capital markets activity is picking up, with both equity and corporate bond issuance rising off 2022 lows.
“Liquidity indicators generally have a favourable configuration for risk assets,” he said, pointing to a weakening U.S. dollar, improving issuance trends and risk-on positioning.
On currencies, Habib noted that the U.S. Dollar Index recently hit an initial downside target of 96 and speculative positioning is “getting oversold,” which could set up a countertrend bounce, though he maintains a bearish bias below 100.
Top-ranked assets in Paradigm’s momentum models include precious metals, Canadian equities, U.S. growth equities, and global equities ex-U.S. Habib said equities remain in firm primary uptrends relative to fixed income, while commodities have confirmed a structural trend change in their favour versus bonds. Precious metals are “verging on structural breakouts relative to equities,” he added. Bonds remain at the bottom of the firm’s asset-allocation hierarchy.
Major equity benchmarks are testing key technical levels, he said. The S&P 500 has reached Paradigm’s 6,500 target and is now less than 5% away from 7,000, while the TSX Composite has hit 30,000. Small-cap benchmarks, including the TSX Venture and TSX Small Cap indices, are approaching their own targets as they transition into new structural bull markets.
“Global breadth continues to expand,” Habib said, pointing to breakouts in the equal-weight MSCI ACWI through its 2021 highs, driven by Canada, Hong Kong, Japan, Peru, Australia, and the U.S. He noted that Chinese equities entered a new bull market in September 2024, while Korea and Japan are breaking out of long-term bases.
While the S&P 500 looks expensive from a valuation perspective, Habib said it still has room to run before reaching “bubble” territory. Mid-caps, small-caps, the equal-weight S&P 500, and global equities offer stronger risk/reward technical setups and are not at valuation extremes. He would not fade the S&P given the ongoing strength of the AI investment theme.
Momentum and growth remain leading factors on a sector-neutral basis. Industry groups with favourable technical setups include software, semiconductors, banks, global materials, metals and mining, uranium, rare earths and biotech. Among U.S. sectors, utilities, financials, industrials, communications services, energy, consumer discretionary and tech rank highly in Paradigm’s breadth models, while real estate, materials, consumer staples and health care rank poorly.
Leading themes in Paradigm’s momentum models include junior gold and silver miners, the growth factor, crypto, uranium, and aerospace and defence. By contrast, home construction, REITs and energy services are among the laggards.
Habib highlighted some near-term tactical risks, including overbought conditions in leading equity segments, emerging stress signals from some private credit funds following rapid sector growth, and the potential for a temporary U.S. dollar bounce.
He said treasury yields remain in a broad sideways range, with key technical levels on the 10-year note at 3.30% support and 5.20% resistance. Bond market momentum is neutral, and fixed income remains structurally weak compared to equities and commodities.
Commodity benchmarks continue to build on the uptrend that began in 2020. Metals are leading the cycle, while energy and agriculture are currently lagging but may participate later. Gold has surpassed several intermediate targets and remains on track toward Paradigm’s $5,000 major target.
“We do not see any evidence in positioning data to warrant a contrarian stance,” Habib said. He added that silver is nearing a 45-year cup-and-handle breakout, and copper appears “poised to play catch-up” to gold. Oil remains weak but lightly positioned, presenting a potential contrarian trade if WTI recaptures $65.
On currencies, the DXY is breaking down from a major topping pattern, with downside potential into the 80s, though oversold positioning may prompt a pause. Paradigm sees favourable setups in GBP, CAD, and JPY against the USD based on speculative positioning data.
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