Kim Bolton A Comment -- General Comments From an Expert A Commentary COMMENT Sep 10, 2025

Given the string of numbers we've seen both north and south of the border, he'd be inclined to want to cut rates. However, the Bank of Canada's already been very aggressive on that front. They don't need to, but it's clear with the job losses we're seeing that the level of nervousness at the BOC is high. 

It could go either way at the next meeting. Right now, the market's giving it an 80% chance they'll cut by 25 bps.

We had a big revision a month ago to the employment situation, which President Trump was very upset about. Then we got Friday's report in the US that confirmed a fourth month of weakening payroll growth in the US. At an average of 75k jobs a month, which comes out to a bit less on a 3-month average, the trend is clear.

The demand for labour in the US is weakening, but we're not yet seeing unemployment and layoffs tick up in the weekly claims. That's the next part of the cycle. If this gets worse, we're going to start to see layoffs at some point. Right now, it's only a pause in the demand for labour.

Now there's the Treasury influence on the Fed. Scott Bessent put out a piece in some of the journals on the weekend about Fed independence. There's a political game going on here. They talk about independence, but the influence is very clear. The Fed will certainly do 25 bps. Could they or should they do 50 bps? Probably not. 

The slower they go, the better it will be in the long run. Don't want long bonds rallying higher on fears of inflation being reignited. If the labour situation is that weak, then they will have to be more aggressive. We won't know until we see more data. Predictions in this area are notoriously imprecise.

Equity markets are extremely overvalued, especially in the US. Better value in other places. You can switch from a growth-oriented ETF to something that gives you a bit more protection. This allows you to keep playing. ETFs are coming out with more innovative products, such as one that gives you 10% upside over the next year, or 10% on the downside if markets go down 10%. A good choice for those who might think there's not much upside left, but don't see a big correction coming. See today's Educational Segment.

It's not about raising cash. It's about trying to stay fully invested. As we know from history, markets that are overvalued can remain overvalued for years. The late 90s was a great example with the tech bubble. This AI-led market expansion has decades to go. Take data centres, for example. We currently have 11k, but we'll need 30k in the next 5 years. That growth is driving a lot of capex, with ancillary benefits for the economy.

Growth of ETFs

Lots of new products. No one issuing ETFs can try to compete with the MERs of Vanguard. The game is over in terms of cost-cutting for ETFs.

Today there are more ETFs listed on the ARCA of the NYSE than there are single stocks. So the ETF world is growing rapidly. But almost all the new products are innovative and thematic. They're charging management fees that are 70-150 bps. But they're doing things that are different. There's also more work and thought involved than just replicating the biggest index in the world.

Here's an example of an ETF he likes to use, RSP, at 20 bps. It's an equal-weight S&P 500. ProShares recently launched an ETF called URSP -- ultra, which means it's 2x the upside and 2x the downside risk when you're wrong. URSP carries an MER of 95 bps.

Fixed income's been dead forever with falling interest rates. But it's one of the fastest-growing areas in the ETF world. Active strategies are growing rapidly versus passive strategies. Why? Because the average management fee on  passive is very low, and no one wants to compete with the Vanguards. But you can compete if you have an active strategy, while earning more in MERs. Many are worth it, but some are not.

At his conference in California this morning, he picked up a fact sheet for DDTS. For 79 bps, it gives you 10% upside on the S&P over the next year and 10% downside. If it goes down more than 10%, you're at risk, but you can't get more than 10% on the upside. Lets you make money on both sides of a market, but you are paying that higher MER.

There is investor speculation going on in different areas along with the return of meme stocks. An IPO window is opening and there is more leverage to ETF's coming to market. Also there is an increased popularity of call options, penny stocks are are coming back in vogue, and tech stocks are way up.
However just because the market is hitting all time highs doesn't mean it's going to drop back right now. The overall sentiment is still quite neutral even though parts of the market are getting frothy. The U.S market is becoming politically polarized with the Republicans being much more optimistic. There are grounds for interest rates to come down.

There will be weakness to finish this year. Is bearish. The economy has been resilient, but Canadian GNP for Q2 was negative, and last week's US job numbers were weak last week and even this morning average gains in the past year far lower than projected. Thing is, companies are not laying off workers, given less migration and the lack of workers. Companies are not adding jobs because of the unknowns by tarrifs. Expects the Fed will cut 3 times and the Bank of Canada goes back in to an easing mode. Valuations are at all-time highs, and so earnings are at risk. He is trimming some tech positions and looking at defensives like telecoms. He questions this so-called broadening trade. Cyclicals will have a tough time going forward. Tech continues to deliver 20% earnings growth, so he maintains a health tech weighting.

Too early to say. But he's lightened up a lot on the software side, mainly because the market has told him to lighten up. The likes of NOW, CRM, and ADBE -- the kings of the hill in the software sector.

The ones that are doing the best are the ones embracing AI. 

No. The effect is going to carry on, as Trump's only 6 months into his tenure. So we have another 3.5 years, and his operating memorandum is all about tariffs. That's how he gains leverage and forces people to do what he wants them to do.

He started with INTC at 15%, and so he's making some money. That's pushing it a bit too far. The legal side is starting to weigh in and say that he's overstepped his authority. But he'll look for another way, same as he's doing with the Fed.

There's a rule to buy software companies when growth + margins = 40 or more.