Larry Berman CFA, CMT, CTAA Comment -- General Comments From an ExpertA CommentaryCOMMENTDec 29, 2025

In today's environment, you see a lot of the market whipsawing back and forth and different sectors come into favour based on speculation (and Trump's statements). A lot of companies, that aren't involved on a headline basis, grind along and get overlooked.

We do know that Trump won't be president in 2.5 years, and businesses will move on. Perhaps in the midterms Donald will be neutered a bit more and won't be as, let's say, aggressive.

He doesn't own any. There's been a huge capital expansion, and that has to do with AI. At first, some of the chipmakers went crazy. Then the likes of CLS, MU and DELL got a lot of orders to build these data centres. 

So what's happening right now is that people are asking will this continue? It'll continue, but at some point the capital expansion in the AI sector will slow down and roll over. There's only so much money. The way the sector is being priced is reminiscent of 1999.

Any inflation today is really just caused by geopolitical events (oil prices) that can go away at any moment. Core inflation seems to be dissipating a bit in the States. You have a new Fed chair, who came in under Trump, so Tim can't see him raising rates.

If they raise, it's to choke off a hot economy. But the economy's just hot in certain sectors. It's moving along pretty well in the States, but it's not overheating.

A lot of companies in the sector were bid up quite a bit about a year ago. It's now a question of valuation. 

AMRZ is one of his infrastructure stocks. You can also play infrastructure via the big private credit/equity firms like BN, BX, and KKR.

It's all just noise. But noise sometimes allows us to sell at a great level or to buy at a great level. Noise is what makes a market. Over the long term, most of the company's we've covered today are going to do well.

In summer, markets are thinner. And when there's not a lot of volume, prices can swing more than usual. September/October taking us into the US midterms will really show us the direction of the market. Keep an eye on company earnings, what they're guiding to, and how the economy's doing. 

In the US, the economy is doing fairly well. In Canada we're in a technical recession, but looks as though we're starting to come out of it. He's fairly optimistic on the economy for the next 2-3 years.

His signals point to a market peak. Momentum is coming into defensive stocks, signalling new highs today. Growth is breaking down vs. value. The tech trade this week could be front-running the Fed meeting later this week where they could raise interest rates. If so, this would contract liquidity and hurt cyclical and growth stocks. Insider selling is elevated and margin debt is high. The indices aren't doing much, but there is a large momentum blow-off and rotation. There could be more insider selling later this year. Margin interest by investors is extreme; extremes happen close to market peaks. The rotation into defence could continue. The Mag 7 has powered the market, but their giant free cash flows have gone into investing in AI. CDS's are expanding to names like Nvidia and Broadcom. If inflation returns, tech and growth stocks will be most harmed. The risk of an oil spike, to the US-Iran war, is abnormally high and oil prices could be more damaging than in spring. Energy and healthcare are sectors that could do well. Healthcare has been out of favour, generates a lot of free cash flow and not effected by oil prices; also is driven by aging demographics.

October highs and relative performance resembled the peak of the Tech Bubble. Now, we're breaking down from critical levels where the tech bubble cracked. Moving has been and will rotate into growth and value. He's looking at the beneficiaries of AI like biotech, which has lagged but is overperforming this year. AI tools are benefiting their R&D.

Q3 is off to a shaky start. Q1 was good and Q2 great. Everybody is excited by earnings growth with the S&P up 30%+ based on Google's report last week of $98 billion of profit, but that came from Spacex shares. Investors ask what is the AI picture for the next 12-18 months? Uncertainty over the Fed's interest rate policy (will they hike and when?) is concerning investors. What's driving that is the uncertain US-Iran war. So, investors are stepping back from the momentum trade of the last 3 years to wait. AI is half the US GDP growth, but meanwhile, China is building new AI models that will drop the pricing of AI.

He'd be very surprised if they raise rates. If you really look into it, what's driving inflationary issues today is largely linked to the spike in energy prices because of what's happening in the Middle East. Beyond that, he doesn't see a broad-based worry about inflation.

The Middle East conflict will be elongated (we thought peace was imminent, now maybe not), and inflation concerns will be with us for a while. For him, that means the Fed can't cut rates. But they're certainly not going to raise rates, because raising rates is not going to fix the issue in the Middle East.

Sure he does, but even he understands (one would think) that the Fed can't do it at the moment. But when he's out in public, he needs someone to yell at because that's his style. So he's gone after FOMC board members.

Chairman Warsh has set up committees, and defers to the groups' opinions whenever he's been asked recently about rates. He's going to let the data drive things. And right now, the data does not support a rate hike.

Not really, but you do have to understand where the distribution comes from. True, some ETFs are tricky that way. It really depends on how it's being presented. Often, when an ETF is growing quickly but hasn't yet earned its stated yield, the return might include a return of capital to reach that yield. What you need to do is look through the ETF and determine if, based on what it holds, it can generate that type of return.

It is yield, as it is paying out that return. But in many cases it's ROC. Some people might call that a tax-efficient way to get income out of a portfolio. 

He's advocated these as opposed to traditional fixed income. The investor's talking about public companies that trade as MICs on the stock exchange. 

There's a difference between a public MIC and a private one. In the public markets, you get the volatility both up and down. You have some growth potential (which you don't have with your typical MIC), but you have a lot more volatility in terms of interest rates or risk to housing in general. If you can handle the ride, and the MIC is large and well diversified, not a bad time or place to put some $$ to work compared to the private ones.

All the private ones are very transparent. They all ought to have audited financials. If one doesn't, then pass; you don't want to be there.

If you take the total world index, your yield is about 1.7-1.8%. If you want 2% or more, you have to have concentration in areas that pay higher dividends.

For example, many tech stocks don't pay a dividend. But there are a lot of dividend-weighted ETFs that give you exposure to Canada, US, international. As a general rule, Canada (banks, energy, lifecos) and international have higher dividend payouts than in the US. Why? Because the US has a lot more tech than everybody else. 

He likes the BMO international covered call strategies. It's a way to get enhanced yield and income in a tax-efficient way.

Look at any of the utilities or banks in Canada -- all have very high quality and stable preferreds, without you having to worry too much about credit risk. As a Canadian, you want a pref that comes from a Canadian corporation if you're in a taxable account (as you get the benefit of a tax credit in there). Don't look to foreign jurisdictions, as the income doesn't get preferential tax treatment.

He can't give a specific recommendation, as he hasn't done a deep enough dive on credit research.