Gerald Allaye-ChanA Comment -- General Comments From an ExpertA CommentaryCOMMENTMay 29, 2009

We forget to look at the positives in the market, possibly: a resolution to the US-Iran war, continued AI investment, continued infrastructure investment amid re-shoring, or an economic boom from AI efficiency, possibly in increased jobs or productivity. Also, possibly good, old-fashioned earnings growth. There's also something to worry about, like geopolitical risk. About 70% of the TSX is financials, commodities and energy, which worked well in 2025, but if say two of those three go sideways, then the TSX could lag other markets. He focuses on growth and momentum, tech and AI. He looks at strong balance sheets, good momentum like 52-week highs and positive cash flow.

He is optimistic in spite of the volatility and is still seeing earnings estimates for the S&P 500 continue to climb and even accelerate a bit in March and April. He hasn't seen the AI parade affected by higher oil prices as well as the consumers too much. Corporations are still doing quite well and AI will benefit many companies throughout the whole economy. He has seen big pullbacks when investors get shaken up regarding the future of AI which presents buying opportunities for trading. The market is expecting a relatively short term for the war with Iran. However if it drags on for a long time this would have an impact everywhere in the economy including a spike of oil to $200. 

Starting to see 30-year US treasury yield above 5%. You could argue that these rates in fixed income are providing some competition for equities. It increases the cost of capital for both businesses and households.

It's no secret that a certain individual wanted to get rid of J. Powell. Warsh is just 1 vote in 12, so it's not that big a difference. Any jeopardy on the independence of central banks would be a bad thing.

Delinquencies on mortgages are rising slowly. Insolvencies are picking up. PCLs could pick up somewhat. We forget that capital markets are cyclical because we've had boom times for several years. Potential softness in the economy.

It's not that the businesses aren't worthy, just that they might not be afforded the same multiple as today.

Not going away anytime soon. Quantum is interesting, as it can upend everything. All players will have to absorb large language models into their offerings.

His firm is more likely to take $$ out right now, rather than put new $$ in. Doesn't feel that $100 oil is sustainable. If prices continue at that level, we'll see demand destruction. We could wake up tomorrow and find that oil is $70 because everything's been resolved.

People react to what's going on in their own environment. We hear daily about turmoil in Iran and the Fed raising/dropping rates. What's most impactful to stock prices are the fundamentals of individual companies. 

An old adage is that "stock prices are the slaves of earnings". If a company performs well, it will manage to navigate through the external noise.

The risk is that we see what's working, and over time our portfolios become concentrated in those industries and sectors. The concentration introduces a lot of portfolio risk, which is only evident after it's too late.

Remember to diversify. It's not bad to have some sectors/industries that may not be rewarded today, but whose companies are great quality and will be rewarded tomorrow. Just let them stay in the shade and they will eventually appear.

For example, healthcare is at a 20-year low on market cap as a percentage of the S&P 500. Years ago, who'd have thought? Especially given the aging population and new technology in treatments. It will eventually have its time in the sun.

Healthcare is one place to look, and there are good opportunities there. It's a broad area, so you have to be careful about the sector/industry and individual company you invest in.

If you do your research and concentrate on quality companies, they'll see you through.

His firm has some representation in its Canadian portfolio via AEM, and he recently added. But still underweight gold. See the article at goodreid.com, under Insights, for a historical perspective.

IPOs are strange animals. They're presented as something to buy because it has the glitter. Yet you have to look at why it's for sale. It's because the seller thinks it's a good time to get a premium price. Does he really want to be on the other side of that trade? No.

Let an IPO happen, let it settle, let it prove itself as a good-quality company. Then see if you want to make an investment.

Indices have run up quite sharply since the March 30 low. We're seeing a working off of overbought conditions (especially in semiconductors). Underneath the surface a lot of areas of the market have consolidated.

As we speak, the market looks today as though it's trying to reaccelerate. Discretionary has rallied, as well as industrials, which are some of the more risk-on areas that have been under pressure for the last week or so.

Beyond this short-term correction, his team is very constructive. It appears that a broader, intermediate-term, 3-6 month rally is underway. That should take us into July.

Yes -- things like discretionary, industrials, and more risk-on parts of the market. In his view, we're in a new 4-year cycle (essentially, a 3-5 year cyclical bull market). 

We're in the expansion phase of the business cycle. This phase should take us sometime  into the middle of 2027, and that's despite geopolitical risks.