David Burrows A Comment -- General Comments From an Expert A Commentary DON'T BUY Jun 11, 2025

Reality is that, off the bat, companies are working hard trying to eat some of the tariff costs. The questions are how long will tariffs be in place and how high will the costs be? Ultimately, companies will have to assess that.

Inflation is still pretty sticky, though it could moderate. For those who want rate cuts, moderating inflation in the near term is positive. That's going to be a bit tricky. Over the last few months we've seen an uptick in commodity prices, and that will start feeding through into the inflation data. Energy prices, for example, have started to tick up again. 

The market's signalling that inflation is still a concern, because inflation-oriented assets are outperforming. He doesn't see any change in that.

It's interesting. For all of the people who are concerned that tariffs are going to slow things down, the signalling from the market has been quite different. Think about where leadership is. Financials continue to lead, especially the capital markets banks and investment banks. Also seeing strength in industrials in general, which sort of belies concerns about the economy.

When you look at defensive sectors (consumer staples, REITs, bond proxies), there's no sign of any relative strength or performance there. If things were slowing down, you'd expect them to pick up. 

We're in the middle of bond auctions, 10-year today and 30-year tomorrow. Longer-term yields have been building in a bigger and bigger premium for the term that money will be locked up. Again, that speaks to the risk that governments continue to spend and rack up more debt. 

So more inflation-oriented assets are performing well -- basic materials, gold in particular, uranium, fertilizer stocks. Those don't point to a deterioration in the economy.

The more economically sensitive sectors are gathering steam. Healthcare, for example, isn't one of them; US government is trying to hold cost inflation down. Healthcare doesn't have a lot of pricing power right now to pass costs through. He's trying to focus on companies that generate tons of cash, growing cashflow, with a nicely growing dividend stream.

Massive buildout in infrastructure. Massive pickup in adoption. As with every major technology that comes along, the newest one gets adopted faster than the last one. Adoption is very high across companies. We're still learning where it's going to be most useful. Some of the largest of the large caps (META, NFLX) are the biggest beneficiaries.

One of the things his team's looking at right now is that it seems some of the regulations surrounding the semiconductor industry will be reduced (specifically China, but other countries as well). That could mean an expanded market for the semi manufacturing equipment companies such as KLAC. AVGO has also been a strong performer, and he owns some NVDA. Those two names have strong relative price performance, are economically sensitive, cyclical, and have pricing power.

Two 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.

Yes, he thinks so. It looks as though they have a deal in place, pending final approvals. All eyes are on that, and we'll see what happens. Some other countries still need to reach agreements.

Recession fears are easing, inflation numbers are cooling to a certain extent, and the labour market is very steady in the US. That economic backdrop is still strong, and that's what's carrying the markets these days.

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.