Opinions
Larry Berman CFA, CMT, CTA A Comment -- General Comments From an Expert A Commentary COMMENT Jun 30, 2025
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Precisely. This has got to be one of the most-hated rallies of all time. Since 2019 we've faced a global pandemic, war, inflation spikes, rates hikes, tariff tantrums, and widespread geopolitical instability. Yet global economies remain resilient and robust, while investors are reluctant to embrace this rally. Strange.
Particularly in Canada, the word "tariff" is hitting home. He believes the skepticism is misplaced, as there are underappreciated tailwinds. We have strong household and corporate balance sheets, and there's potential for a pivot to a dovish monetary policy. These things can surprise to the upside.
Starting to see tariffs work their way through negotiations. The lack of clarity is being cleared up. Layer on top of that the accelerating effect of AI, which can both increase productivity and exert a deflationary force across industries. The long-term case for growth becomes pretty compelling. Odds of a recession are overstated.
Premium contentWorking out better than expected. But it'll be a bit of a tough road as time goes on. A lot of what Canada does and sells is under pressure and likely to remain that way for some time.
Tomorrow's the deadline, and he doesn't think we'll have a new deal. Get used to it ;) Trump seems adamant that there will be no extension, and he seems to be taking a pretty tough stand on Canada.
Definitely uncertainty out there, which is surprising when you see that markets are at all-time highs in both Canada and the US.
But he looks at the market long distance from an options perspective. So he likes the uncertainty, as it keeps both options prices and implied volatility higher.
He couldn't tell you. His firm has maintained pretty cautious optimism. Businesses have to adapt to whatever the market throws at them. Investors have been more optimistic than he would have thought.
He's out there still trying to find value and maintain the positions that haven't gotten too extended.
He wants companies that are trading at attractive valuations. PE is not the be all and end all, but it's definitely where he starts his analysis. Both META and MSFT had pretty good numbers this quarter and the stocks are doing well today. If you plan to own all of them and want to buy more, then buy the ones trading at cheaper valuations.
There are some strategies you can use, though it might be a longer conversation. His team has recorded some webinars on this topic, which can be found on their website.
If you own a stock and it goes up, you're making money at 1x (if it goes up $1, you make $1). There's something called a 1x2 call spread. With this strategy, you buy a call option as well, and then sell 2 calls at a higher strike. What you can do is pay for the call by selling the other 2, so your net cash outlay can be zero. Between the window of the call that you bought and the 2 that you sold, you actually make money at 2:1. Above that level, you stop making money. This method could, potentially, get you back to break-even more quickly.
It maintains the same downside. If the stock keeps going down, you didn't pay any money to put the trade on, so you're at 1:1 on the downside.
GDP
Last week, he talked about the cost of funding all the debt in the US. What we heard last week from President Trump is very disturbing; he said that any of the new debt needed to issue to pay for the "big, beautiful bill" should be 9 months and less. So he wants to finance all the new debt with bills. That's literally like printing money, which is inflationary.
Scott Bessent spoke this morning. He could have walked back what President Trump said, but did not. Looks like the Treasury is going to manipulate the way it's financing the debt, so that it can lower the cost of interest rates.
US total debt today sits at $36.2T; that's the debt ceiling, can't issue any more. That will change in July, and the debt's going to go up. The dot-com boom was the last time they had a surplus, and it's been deficit financing ever since. The GFC and Covid both added to the deficit, with the rate of overall debt going up. Now at the point where it's choking off natural economic growth.
So, what does the administration want to do? Manipulate the market, spend more money, get re-elected.
Historic US economic growth was 2.4%. Today, the number is 2.2% and they've racked up a lot of debt. And the cost of that debt is sucking away from future potential growth. The system's broken, and there's no political will to fix it. A few brave souls are standing up to speak out, but they'll be coerced into voting with the team.
Government bonds in your portfolio, that historically have been thought of as safe, are riskier now more than ever. The Fed will only lower rates when the economy starts to slip; remember that the debt:GDP ratio will increase, because deficits go up when an economy's weaker.