A Comment -- General Comments From an Expert (A Commentary)

From around mid-February to the beginning of June or so. It's when oil producers stockpile ahead of the summer driving season. NA is the biggest customer of fossil fuels for driving. Means that energy stocks can tend to go up a bit during that time, and then go flat after June.

RSI can definitely help you, as it will show oversold or overbought signals.

He encourages everyone to read his blog at valuetrend.ca. In a nutshell, the S&P 500 broke its lower low of 5800. Just broke the 200-day MA, and it will rally on the oversold condition (and we're seeing that rally today). If the market moves above 5800 and its 200-day, then maybe it's not a bear market.

But if it reaches 5800, or just a tiny bit above, and starts to fail again, then he'd say that's a bear market.

Technology stocks that are well positioned for tariffs:

Technology, as an industry, is quite large. Some companies in different niches may be impacted to varying degrees. That said, we think software companies, especially ones that operate on a global scale, that have most of their revenue from international sources or a minor percentage of total sales from the U.S. are expected to be less affected or immune from this political trade war.

Topicus.com Inc. (TOI, Market Cap: $11.6 billion): a serial acquirer of vertical market software focused on the European market.

Vitalhub Corp. (VHI, Market Cap: $506 million): an acquisitive growth software company focused on healthcare with minor revenue exposure to the U.S.

Celestica Inc. (CLS, Market Cap: $15.6 billion): a supply chain solution provider with less than 10% of its revenue from the U.S. market.
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Given tariffs, worries over energy demand are now front and center. This partially explains the disconnect between the oil price and its fair market value (FMV), well over $15/barrel. Don't believe what you hear; believe what you see. For example, yesterday the US Sec. of Energy said, "We want $40, $50 oil," as if US shale producers will magically grow production by 3 million barrels a day. That is what you hear. What we see: last year, oil averaged $76, $10 higher than now, but the rate of US shale growth was the slowest ex-Covid since the rise of US shale. Therefore, that story of low oil price from higher shale prices is false. The price is raise production is about $70. US shale is approaching its peak production rate in the next 1-2 years, much lower than in Trump's first term. This lower shale output will allow OPEC+ to slowly bring back curtailed volumes onto the market starting in April. Oil sentiment has returned to the lows of the Covid lockdown era. This is staggering to him. But this uncertainty creates opportunities.

They are a massive distraction. Say, 1% tariffs on Canadian oil, that means a 7% hit to cash flow MAXIMUM, assuming the loonie doesn't fall further. In one scenario, cash flow rises under tariffs, given the magnitude of a likely sell-off in the loonie. So, tariffs are potentially positive for Canadian oil and gas. Tariffs are noise. He predicts that tariffs won't be in place for long, if they happen, because they are a direct tax on the American consumer in oil, which leads to less money in discretionary spending. Tariffs are complete idiocy and accomplish nothing. It's massively inflationary.

1973 saw Nixon's Watergate and the oil embargo. This isn't today's world. Instead, the markets now are overvalued and there is geopolitical uncertainty. Doesn't see a 40% bear market like 1973, but we are seeing the forth come off. Today's market can sustain a 20x multiple or -300 or -400 S&P points (5,200-5,300), which he doesn't like, isn't cheap. But he might buy at those lower levels.

Technicals tell us we'll soon get a bounce, but he doesn't know when and he doesn't see a catalyst to trigger a bull market. First, the Fed's survey, The Beige Book, recently saw a major spike in the number of times "uncertainty" appeared (a survey of business sentiment). Businesses are very, very cautious. Similarly, the AAII survey of individual investors shows bearish sentiment, so we're close to a bottom. Thirdly, the graph of current volatility vs. expected volatility in 3 months is also at an extreme. So, day traders can ride this out, but not mom and pop investors in or nearing retirement.

He's been cautious for months. The market is overvalued. The hedge fund community is very levered. Time to take some money off the table as some of the froth is coming off. There's nothing fundamentally wrong with the economy. Take Tesla: at 200x earnings is insane; they sell cars, so they should be trading at a premium to GM like 25-30x earnings. So, Tesla has another 50% to fall before it's even reasonably priced. The best support for the S&P is 5,200--last August's bottom. By before that or wait? Doesn't know. Don't expect a 50% drop, but 10-15% which is healthy.

Utilities and energy companies well positioned for tariffs: 

Utilities primarily serve consumers and businesses in the domestic market. The industry provides essential products and services that are recession-proof in nature. These companies’ facilities are mainly located in the local areas where they operate. Therefore, there is a low exposure to tariffs. 

In addition, though some energy companies that have a decent business volume from the U.S. could be affected, there are other companies that generate revenue and own assets in Canada and, as a result, could be less affected.

Suncor Energy Inc. (SU, Market Cap: $63 billion): an oil-refining company with the majority of operating revenue and assets located in Canada.

Hydro One Limited (H,  Market Cap: $28 billion): operates as an electricity transmission and distribution company focused in Ontario.

Capital Power Corporation (CPX, Market Cap: $6.9 billion): a developer and operator of renewable and thermal power generation facilities.
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Maybe we are not at the panic stage yet but the markets are retreating due to tariffs, AI questions, uncertain U.S. economic and foreign policy. Maybe we have hit a bottom but we can't tell. He is looking for new lows earlier in the day followed by buying back in later. Consumer spending which has been constant is shifting along with sentiment so there is concern going forward. He has been taking some of the volatility out of clients' portfolios through asset allocation while still protecting them against the cost of living increases, inflation and their need for money in the next few years. With the downdraft this is an opportunity for younger people to double up on the the market.

The question was on an i shares Composite High Dividend ETF and individual securities. He would not go into single securities at this time. An ETF is more stable because it is diversified and can take draw downs. He has been and still is avoiding Canada, now because of tariffs and the economy. Also there is an election coming up and there will be a new administration.

The question was on ETF's hedging the U.S. dollar. This involves timing and that is an issue. He is going unhedged recently. If the U.S. dollar is strong then go unhedged. If the Canadian dollar is strong and going up then hedge. Sometimes it's best to not pay attention to hedging and just let it play out.

Diversification goes back to asset allocation between fixed income and equities. There are over 1500 ETF's in Canada,

The question was on a minerals ETF such as UAM in the uranium field. There is also URA. Do not hold more than 5% in a 100% equity portfolio.