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Opinions Larry Berman CFA, CMT, CTAA Comment -- General Comments From an ExpertA CommentaryCOMMENTJan 26, 2026
Larry Berman CFA, CMT, CTAYou might be interested:
He's held the hyperscalers as core holdings since 2015 and he still sees upside. The past quarter validated that with acceleration in the cloud business by Amazon, Microsoft and Google. Margins increased. But there will be more competition for AI services and prices are reducing for best-in-class models. Meta's in the doghouse from regulatory issues and are spending a lot of money but their core advertising business is on fire, which may surpass Google Shopify is using AI to accelerate its core offerings. As for software, Microsoft's Co-Pilot keeps getting better, while ServiceNow will build AI functionality across all its platforms. End users will use software they already trust, but will use AI.
Nvidia is the next big earnings report, next week Wednesday, then there's Jackson Hole. This week will see just a lot of noise. From Nvidia he wants to see how this "leverage on leverage" of circular financing works, which recalls the leverage that led to the 2008 mortgage debacle. It's great that the rally is broadening and earnings keep rising. We're late in the cycle and concerned over bubble characteristics in the market, though overall he's bullish. Given current valuations, the 10-year forecast on the rate of return on the S&P is negative--but the peak may be two years from now.
They're like T-class mutual funds where you get a component of your return every year. This is very tax efficient; the full distribution in the current year is not taxable. For those seeking tax efficiency now and need current income.
BMO. But how much credit risk will you take--high yield or investment grade? What's your time frame? Historically, credit spreads are very tight, so don't take credit risk now. Because rates are backed up, he doesn't mind taking duration risk. But will it make him a total return positive in the next few years? Not sure.
It's 55 years since Nixon took the world off the gold standard. Gold demand: 45% from India and China, mostly jewelry for gifts, but is a huge variable as the gold price fluctuates; 5% used in electronics and medical devices, but gold is expensive so other materials are used; 22% from central banks who keep buying more gold, and 28% from investments like ETFs, which is the speculative part. He likes gold and is bullish, because governments are inept at managing tax dollars. Gold will rise in the long run, but won't break out but go sideways for many years.
The S&P is in a bullish trend with the moving averages (13-, 26- and 40-weeks) sloping upwards. It has a strong floor of support under the 13-week. The S& recently made a 52-week high but didn't reach the top of the Bollinger bands, which means the index lacks momentum. However, watch 7,620, a key level if the S&P breaks down and could signal a sell-off. However, keep an eye on the bond market and the 2-year treasury yield; if it rises above 4.24% we're in trouble and the S&P will drift down to 7,514 (support). If rates stay in control, the S&P will keep rising. The S&P equal weighted index is outperforming the market cap weigh. Here too the three moving averages are sloping up, beautiful. Support is 8,360 in SPEXW. SOX index (the semis): support is 10,797, but we still need to see if the uptrend will continue. Watch NVDA's report next week which could give SOX a major boost.
He looks at a number of factors to determine market direction. It was mainly the technology sector that experienced a summer swoon. Luckily some of the other sectors held up, such as financials and healthcare. At the end of July and early August, everything has come back together.
That's a really good sign for the market. It means that there's strength elsewhere than in just technology.
He also looks at credit markets, which aren't showing fear or widening spreads. Interest rates have been a big story this year -- expected decreases flipping to potential increases. There's still a buffer there to decrease if things go off the rails with the economy. Lastly, we have low volatility. There's a saying: "Never short a dull market." When volatility dies down and markets seem to be trending higher, that's not the time to get out.
That was part of the tech swoon. Hyperscalers came out with good earnings, but there are concerns on the capex side. This is a really big investment cycle, and the market acknowledges that these are big numbers but can see them working out over time with monetization. They also have massive cloud revenues to back up spending.
Canadian market's been on a tear for the last 2 years. Right spot, right time. We have lots of energy, financials, and materials. He hopes we can do more to access those and bring them to other markets. We're really firing on all cylinders in Canada. It's our time to shine.
Sees that persisting. The banks are getting high on valuation. Don't mess with the trend. If the trend is higher, you keep going.
Fair question. He might have a market outlook and thinks he's right. But what if he's not? His team always grounds itself in asset allocation. If something's run up, they take some profits and put them into fixed income.
Investors can suffer from recency bias. Times have been good, so why shouldn't they continue? Protect against that by taking profits along the way.
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Position Weight for Stocks, with MSFT as an example
Everyone wants to beat the market. So you have to pick a bunch of stocks and have a higher or lower weight in those stocks.
Fundamentally, you start with the S&P 500. How many do you want to put in your portfolio? Obviously, not all 500. Say you have 20-40 names in your portfolio. When they're going up, they need to be at a bigger weight than they are in the index in order to beat the index. When they're going down, you need to be underweight them. So you have to be somewhat active.
If you don't care about beating the index and be passive, then ETFs are a great way to invest.
When he's on BNN investors ask him whether to own something or to buy it now. There's a checklist he uses, and he's brought it along so you can use it too. These are some of the metrics he uses to add and subtract from portfolios over time.
First question is, fundamentally, do you want to own the name at all? The example he's using on his blog this week is MSFT. Great company, and great long-term track record. But what's its current valuation relative to history? In 2023 at the peak, MSFT had a multiple of 1.7x compared to the S&P 500 multiple. On the recent selloff, it was trading ~1.15x. So compared to the last 5 years, it's relatively cheap. It's an opportunity to start to overweight MSFT. If MSFT is 5% of the index, you want more than that in your portfolio.
Then, ask if anything has changed to fundamentally change that valuation?
Then he looks at forward earnings and the analysts' consensus.
Then he runs a trend channel. You can see that the stock's trend is up for the last 4 years. Ideally, you want to enter the stock when it's in the bottom half of the channel. That's where it has better relative value.
Look at relative strength index (RSI) and when it indicates a stock is overbought or oversold. Ideally, you want to buy when it's more oversold than overbought.
Finally, see where the stock's trading statistically (the z-score). That tells you how many standard deviations higher or lower a stock is trading, relative to the valuation over its historical and long-term timeframe.
Very recently, MSFT traded down to the bottom of the trend channel and the valuation became relatively cheap. Anytime it dips below zero on the z-score, that means it's cheap relative to its long-term trend. The upshot is that now's a good time to overweight MSFT.
Compare that to AAPL -- cheap a year ago, but no longer.