Scott Willis A Comment -- General Comments From an Expert A Commentary COMMENT Jun 29, 2018

His funds were down around 15-20% only 2 months ago, but now are up 2-3%. Everyone took their eyes off AI and focused on tariffs. And now it's returned to AI. Heavy spending on AI has continued without a decrease. Last year was capex spending by the hyperscalers on modeling (large language models), and this year it's on the applications.

Yes, we had confirmation yesterday through the Fed meeting. When they released their comments, they used really aggressive language in terms of what they were expecting. We're a few months into tariffs, and we haven't seen any inflation yet, but it's in the pipeline.

Different estimates he's been reading indicate that it could take anywhere from 12-18 months for tariffs to be fully reflected in prices. It's expected to be quite severe. Along with unemployment, inflation is front and centre when it comes to the Fed moving on rates.

Consumers and businesses have been relying on credit to drive economic growth. More and more, over time, it's the stock market that's been a crucial factor in driving consumption. In view of the less-than-rosy economic backdrop, for markets to be where they are is a little bit surprising.

That's what people need to keep in mind. There is potential for some downward volatility.

It's a good habit to focus on companies that can control their own destiny on financing. Use the volatility that can come up in the market in your favour. From time to time, when markets are going to be very volatile, really good companies will sell off. It helps to know ahead of time what you might like to buy.

He tends to focus on cashflow. Companies that can generate good cashflow, and with strong balance sheets, have a lot of options in tough markets.

Yes, they have had a boost. Then they'll have to deploy capital to capture the trend. 

For Canadian-centric income stocks (utilities, telecoms, banks), our economy is not as strong as the US. More likely that BOC will be lowering interest rates. This would mean that the competition between these income stocks and bond yields gets tighter, tending to drive money into these income stocks. In that case, valuations could still go higher.

Hasn't really noticed any new trends from the Iran-Israeli situation. The trade issues with the US and the rest of the world have been the biggest cause of the decline that started in February down to April. We've seen a big rebound in the markets, with a lot of money going back in. Perhaps people regretted selling.

We're at the top now, pretty close to where we were at the peak earlier in the year. Where we go from here will be determined by how some of the geopolitical and trade issues are resolved. It'll be very important to watch.

In technical analysis, there's a pattern called the double top. A chart will hit a top, pull back, and then hit another top. People are deciding whether or not they're going to buy.

People are going to be looking at earnings, rather than at geopolitical and trade events. Not known yet how those events will affect the economy. Second quarter results will be coming out in the next few weeks to a month. Those will drive markets one way or the other. If you have cash to deploy into the market, he'd wait to see if we break that 6050 or so level on the S&P.

Technical analysts don't predict. They look at the patterns and trade them. He has about 15% cash in his diversified NA portfolio. If markets maintain or break above the resistance level, he'll invest. If markets decline, he'll raise more cash.

Lots of pessimism. Beyond the markets, people are pessimistic because of what's going on in the US. People are thinking about how they don't want to go south of the border for travel. Investors are surprised to learn that their portfolios are more or less where they were at the beginning of the year. They're aware of the decline, but not of the rally.

It's interesting to see how market's have recovered. He's a bit surprised to see that last month was a very strong month, driven mainly by a lot of the tech names we see at the top of the S&P 500. 

Markets have done well, but a big decision point coming. We're now at a big resistance point. If we can break above that, we should continue on for the rest of the year.

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