Opinions
Crypto Talk with Terence A Comment -- General Comments From an Expert A Commentary COMMENT Jan 27, 2022
You might be interested:
Premium contentHistorically, September tends to have some weaker seasonality. That said, we've seen some strong momentum going into September with 4 straight months of gains in the market. Earnings have been good. S&P 500 Q2 earnings were up 13% YOY, with 81% of companies beating estimates. Analysts see about 12% growth for 2026.
Add to that approximately $1T in stock buybacks in the US. Liquidity of $7.2T sitting in cash in the US. That's a lot of dry powder and could potentially be a powerful tailwind for equities, especially if we see an interest rate drop (90% chance of Fed cut later this month, 60% chance of BOC cut).
All that lays the groundwork for continued gains for equities. Still might see a bit of volatility in September, given that we've had a very strong 4 months.
Independence of central banks is important. That's why we've seen weakness in the US dollar relative to other currencies. That policy uncertainty has been something to consider in the US. But when you look at markets and the drive from technology and AI-themed stocks, the market continues to be strong.
Prefers it to gold right now. Especially the bullion, as you get away from problems with mines and management. In addition to its being a safe haven, you get the added benefit of industrial demand with EVs and electronics. Gold to silver price is about 85:1 right now, very extended and silver might have a recovery.
You have to look at what's happening in the US. The uncertainty on US policies weakens the US dollar, which helps gold prices move higher. Be cautious, as it's very "shiny" and popular right now. Looking back to 2011-2016, gold prices fell 42% over 52 months, and a similar drawdown in the 1990s. There's a risk with gold, same as with anything else. Don't get too overweight, as it can have volatility as well.
RSI is way off the charts here. To enter, wait for a pullback.
He's always optimistic, so the answer is yes. The economy looks OK. He did look at the jobs report. The forecast for Q3 in the US was 3%, and it'll probably still be close to that. Interesting thing is that with today's jobs report weaker than last time, who's Trump going to fire this time?
Good chance of a rate cut in the US, with or without jobs being weak. Trump's pushing hard for that. That should be positive for the market. Doesn't seem to be a recession in the wind, so we should have a reasonable stock market.
Canada's job reports have been pretty weak for a couple of sessions now. The economy is weaker than we hoped, and it's all tariff-related.
Widespread talk about that market being overpriced at 25x PE. If you pull out the Magnificent 7, the less-magnificent 493 are trading at 16.6x PE and that's not a lot. It's below the average of the last 20 years.
His team buys 25 stocks in the US, so he doesn't really care about the market per se except for the beta part of it. He looks for companies that are quite cheap, and he's found some.
He looks only at companies that are fundamentally sound, with businesses that will substantially increase in value over the next number of years. Looks for catalysts that aren't yet recognized in the stock price, so they're cheap on certain metrics. His team's view would be different than the consensus view.
That strategy works well over time, and it works well in slowdowns.
Why Investors Like Dividends: Dividends Get You Back to the Basics
In today’s high-speed investment environment, and with trading platforms that have used gamification features such as Robinhood Financial, it is surprising how many investors do not really know what they are buying. Many don’t even care, as long as it goes up, as evidenced by the meme-stock trades that pop up — and crash — every now and then. Dividends can help remind investors what they actually own: a portion, however small, of an actual operating company. Owning shares means you are an owner of a company. As an owner, you should be entitled to some of the profits, and this is exactly what dividends are. Knowing this, you might be inclined to keep your shares longer, if the company is doing well. It can help an investor ascertain the difference between company performance and stock performance, as we are sure you are aware that these two factors often diverge.
Unlock Premium - Try 5i Free
ANALYSIS ON INTEREST RATES
During the last 2 years, central banks have created massive money (quantitative easing) in order to make recovery plans and avoid the impacts of the economic crisis caused by the Covid.
This injected money ended up massively in the stock markets (stocks, futures, cryptos), which contributed to give a huge boost to the different assets and to pull them higher and higher. Nevertheless, logically, this huge money creation of several trillion dollars contributed to increase inflation.
To regulate this, central banks can generally play on 2 levers:
Stop quantitative easing.
Raise interest rates (today between 0% - 0.25%).
The FED has chosen to raise its key rates for the first time since 2018 (which should start in March 2022), concretely, this means that borrowing money costs more and at the same time, the currency (here the US dollar) that we hold yields more interest. If the currency earns more interest, it automatically appreciates and its value on the currency market increases (you would rather keep 1 million dollars with 1% interest on it than the equivalent in euros with 0%, so you sell your euro to buy dollars).
The equity market is becoming very risky, because with the end of quantitative easing, the liquidity tap will close. As far as the market we are interested in, the crypto-currency market, is concerned, it becomes extremely interesting, because if it is true that it is an extremely volatile market and that it has also benefited greatly from quantitative easing, it is also true that many investors consider certain assets, notably Bitcoin, as a safe haven in the same way as gold and consider using it to fight this inflation. In addition, with some DeFi protocols, it is possible to earn interest passively by staking or farming on blockchain (on stablecoin in particular).
The year 2022 will be very revealing for the blockchain ecosystem, as with the exponential adoption of blockchain projects by many large investors, let's hope that crypto currencies start to de-correlate from other markets, and from each other, in order to fulfill their full potential!