Opinions
Michael Decter A Comment -- General Comments From an Expert A Commentary COMMENT Oct 03, 2023
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Premium contentTwo months ago, who would've thought we'd be at record highs for the TSX, with the S&P up ~20%, NASDAQ up ~28%? The S&P has rebounded nicely, a little more in fact than the TSX since those April lows. The S&P has had a really great run, and trying to reach those all-time highs again (we're 2% away) is a bit tougher. Compare that to the TSX, which has lagged the last couple of years.
He is moving a little out of the US and TSX, simply because he sees valuation discounts outside NA. So he's looking at European and international markets. An uncertain US dollar helps those markets in terms of investment. Falling interest rates outside NA also helps.
He doesn't look for particular countries or regions, he's more company-specific.
Geopolitical risk is always there under the surface. The thing is, Iran doesn't have many friends. Both Assad and Hussein are gone, Hezbollah has been smashed, and Hamas is under ongoing attack. So geopolitically, doesn't think there's a huge risk here. The US is pretty dominant in this area.
Trying to predict Trump is like trying to use a Ouija board. You just don't know, and he sometimes wonders if Trump really knows. In markets like this, it's very important that investors know what they're going to do. He often says that he doesn't know what markets are going to do, but he knows what he's going to do in different types of markets. You need to have a strategy if the market drops 5%, for example. For him, he ignores it. At 10%, he starts paying attention. At 15%, he starts adding back in. At 20%, he adds another 5%.
Look at your asset allocation risk tolerance (and understand what it means), and make sure you have good-quality assets. If markets decline, you can be reasonably confident they'll come back and it gives you a great opportunity to buy more.
The last thing you want to be doing is buying into a market that's at its highs for fear of missing out. The other bad thing is panicking and selling when markets are down. It's the old buy high, sell low; exactly the opposite of what you want.
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Despite today's sharp sell-off, he feels that Q4 will be positive. Happening now is some tax-loss selling. Also, now there's a short-term fixed-income opportunity of 5-6% in GICs and bond ETFs, but there's little reward in holding these for the long term of 5-more years and stocks eventually rebound--and he expects. Remember that stocks can raise their dividends and bonds cannot. October could be bumpy but Q4 will be strong. The next move on interest rates will be down. It's immaterial if there's one more rate increase, likely in November and December, because rates will then hold. He likes energy, financials and industrials, where the selling is overdone and the fundamentals are very good. You can get a 6-7% divvy on a Canadian bank and he can't remember when that last happened. Banks will feel some turbulence over the mortgage market, but they can make more money under high interest rates than low.