A Comment -- General Comments From an Expert (A Commentary)

He's continued to add positions in global markets, as they look really constructive. And he has more Canada than he'd typically have. Canadian market is solidly outperforming the US. Breadth of stocks performing well is better in Canada than in the US.

In a bull market, you need 20-25 positions for a diversified portfolio. If you own a store and your inventory isn't selling, then you mark it down and get rid of it and replace it with stuff people want today. You only have so much shelf space. Same in your portfolio. When something isn't working, and there's no sign that you can find to say it's about to change, then probably move on and do something else. Because you only have so much capital.

Catalysts for Higher Equity Prices: Lower Interest Rates

Small caps depend more on borrowing and typically pay higher rates. When interest rates fall (as expected in the U.S. this year), small companies’ funding costs drop, supporting higher future earnings and stock price appreciation. Historically, small caps have only begun sustained outperformance several cuts into the rate-lowering cycle, so extended monetary easing could act as a catalyst for movement. There is also a big investor sentiment shift when rates start to move lower, and investors are more willing to take on risk with investments in smaller companies.
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He expects Fed Chair Powell to sound cautious. There are a lot of moving parts. The recent labour stats showed cracks. Another labour print before the Fed meets again, which he will want to see. Also, US inflation has been sticky, especially services. Expects Powell to say it's data dependent and won't show his cards. The bull market continues, still led by few stocks and sectors (communications and tech). Healthcare, energy and discetionary have struggled, though, but is not unusual. Bull markets get narrower as they mature. Small caps: he's had great success if you're a stockpicker. Lower interest rates favour small caps which are heavily levered.

Many focus on taxes, but lose sight of investing--to make money. Some want to avoid paying tax so much that they make poor investment decisions. Nobody likes capital gains, but they are a part of life.

Beware of online scammers. Someone is perpetuated a fraud under his name, promising returns and such. He would never do that on social media, except offering advice on YouTube. The Fed this week: What will they do about the future? Trump wants to take away their independence. Many expect the Fed to open the door towards a rate cut. He's not sure, expecting them to be more hawkish and September will be a coin flip based on data (job losses).

He loves alternative strategies, because these funds take no or little direct market risk. Instead, they pick the best ideas and go long, with leverage, then short some names to create the leverage of names they don't like. Few managers are good at this. A manager called AQR, in Connecticut, is one he uses and likes. He loves multi-strategy funds that will be huge in coming decades.

Population growth is based on net immigration and births minus deaths. 20 years ago, Washington forecast a 1.4% productivity rate. The actual growth to 2025 is 1.1%. We need a lot of growth to climb out of this current debt. We're creating jobs, wonderful, but there's a lot of talk of AI to steepen productivity. Getting a liberal arts degree won't cut it in terms of where the growth will be in the future. Rather, the economy needs people trained in STEM research, those who can contribute to AI.

AI spending is at an all-time high, the fastest in the history of any tech the world, including the internet. No, valuations are not excessive, and he's still invested. These companies remain the best-positioned, because immigration policies means a labour shortage, especially in small business whose margins will suffer because of a lack of cheap labour. Stick with the Mag 7.

Tech has been so strong but some sectors like Healthcare that have been really beaten up are starting to rotate. Energy is not ready yet but the gold sector is strong and should accelerate. Valuations are getting stretched in big tech and they could start to grow into their multiples. September is one of the weaker months along with early October. People returning from summer vacations may start examining their portfolios more closely and look at taking profits.

Investing 101: Capital Gains vs. Capital Loses

Capital gains are defined as the increase in value above one’s cost basis for an investment that has been realized upon sale. When Canadian investors sell equities that have increased in value above their cost basis in an unregistered account, they must pay income tax on this increase in value.

Capital loses occur if an investor also sells an asset that has decreased below their cost basis, this realized capital loss can be used to offset any capital gains, and thus decrease one’s income taxes. One technique that many investors use is selling an asset that has decreased in value to realize that capital loss and repurchase the stock 30 days later.
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In all his conversations with professionals and savvy people, not a single person says "Yup, this is how it should be." Most people think there's a disconnect. 

Longer term, if you look at the interest rate policy we've pursued since the financial crisis of 2008, it has destabilized the bond market to the benefit of the equity markets. So equities and valuations have benefited. At the same time, we have an ongoing new paradigm as it relates to AI. And that's feeding off of itself too. 

So it's a number of things happening all at once. At his firm, they just look through all of that and assess where we are today in relation to a long period of history, and where are we going in the future? They still like the stable fundamentals of the companies they own.

The theme that will most likely come through in today's show is "For new money, wait for a better entry point."