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

A lot of it, but not all, is definitely stemming from earnings. We're in the throes of a barn-burner of an earnings season. There's good fundamental support for higher share prices.

But there's another side. There's renewed interest in all things AI, and that's really driven the recovery from the selloff in hyperscalers. The elephant in the room is hopes for peace in the Middle East. Markets are clamouring for that to be a done deal and have priced in a resolution.

Almost certainly the prices of oil and liquified natural gas will settle in a range above where they started. But there's wild volatility. Yesterday, between his going to work and coming home, the price of gas near his house dropped 12 cents a litre. The price of energy is also implicit in the price of all manufactured goods.

A certain amount of destruction has occurred in the Middle East region that's not just going to come back online overnight. Estimates are in the range of 3-5 years for some facilities. There's a long tail to this war in terms of supply chains.

May represent a turning of the tide that Canada is once again investable. That we're going to get out of our own way and build things like the LNG terminal (in which SHEL has a stake) on the West Coast of Canada, which will surface value from our abundant resources.

Broadly bullish for natural gas producers in Canada.

It seems to be looking through the whole Iran issue and focusing on AI. It's also a result of earnings. ANET didn't do all that well last night, but AMD blew the roof off.

You can definitely see the winners and losers. Even with the Mag 7, META took it on the chin. As did MSFT. But on the other side of the coin (and a bit of a surprise), AAPL is a shiny apple ;)  NVDA earnings come out 2 weeks today, and that'll be the end of earnings season.

Earnings have definitely been a catalyst to send the NASDAQ for the better part of almost 2000 points. Once NVDA comes out, it may go back to the macro side of things.

If you look on the charts, the NASDAQ (the barometer of the tech arena) is 12-14% above its 50-day moving average. Whenever it gets up here, it tends to fall off.

A lot of people are going to be writing calls at this point. There's been a lot of FOMO, especially by the retail community. He thinks it's sort of the last gasp.

Levels of the stack: infrastructure and picks/shovels, platforms that facilitate workflows, and then end users make up the top stack. Today, everyone's flooding toward the picks & shovels. But that's because of the earnings that came out.

When he was on the show about a month ago, investors were looking at the end users and enterprise companies that were applying AI tools. This shows through in healthcare, banks, and industrials (such as ETN and TT). These companies are talking on their earnings calls about how AI is feeding to the bottom line.

His indicators signalled high risk yesterday, for the first time in many months. The reason is market breadth is terrible--AI and energy only are making gangbuster returns. This is unhealthy and can't last. His bearometer looks at sentiment (too enthusiastic), seasonality (not good), breadth, valuation (high), momentum and other factors.

If the consolidation pattern has big enough swings (i.e. Shopify), then the stock is tradable, but if the swings are less than 10%, don't bother. With the latter, wait for the breakout.

What really matters is what the daily flow is through the Strait of Hormuz. There's some great data on that, and everyone is able to watch it in real time. As long as there's a blockade, and as long as Iran's oil exports remain contained, we're slowly drawing down available reserves. That's a challenge.

It's being felt most specifically in Asia. It'll be different in NA, as we (fortunately) have so much domestic supply. Prices across the board are starting to move higher. The pressure point is ~$105.

Feels as though we're now entering the prolonged phase of the conflict in the Middle East. Eventually higher oil prices will hit the consumer, but we're still early in that process.

We're very bifurcated at this point. High oil prices, geopolitical uncertainty, and an Iran war stalemate on one hand; extremely high levels of AI infrastructure and US fiscal spending on the other.

As long as those trends continue, we'll see this seesaw back and forth. Last month the market was very strong, as were technology results. But at the same time there's uncertainty over energy prices.

We're now 2 years into accelerated spending from the US hyperscalers, and the spending continues to ramp higher. Tech results were really strong last week, and that's validating the level of spending for at least the next 6-9 months.

The concern that his firm has is that the companies spending all this $$ are not going to see a high enough ROIC to justify it in the long run. The long run doesn't matter at all right now. All that matters is that we had another good quarter of tech results and that spending will increase. We have the conditions for a boom, which works for many parts of the corporate sector.

Other parts of the corporate sector are hurting from oil prices. It's a real yin-yang balance in the market.

Everyone's watching the next 12 months to see what the government's actually going to put in place. We're heading in the right direction.

Government's made it clear as to the levels of defense spending it wants to make. There's infrastructure associated with that component. They're trying to incentivize private capital to mobilize around larger infrastructure projects. Holdup on large projects has always been regulatory hurdles.

Portfolio managers need to take the larger themes and determine which companies will be helped/hurt by those themes. 

Not a Top Pick today, but they own TIH to play the infrastructure theme. Largest Caterpillar dealer in Canada, really good results for years. Also benefits from some AI data centre infrastructure spending. Now that everyone's wised up to it, it's run up. How do you manage these high-quality positions that are doing great, but have a lot of positive expectations priced in? Still owns, but at a moderate position size.

The back months contracts are moving higher, elevated and breaking out of a trading range. The December futures in oil are trading at $90-100, so we got to worry about higher oil prices for the rest of the year. This concerns him. Geopolitical events are measured in weeks or months, but this event will be far stickers. Stock markets don't care, because earnings have been fantastic. The markets will pay more attention to the geopolitical risk and the high oil price at some point. Today could be this inflection day. He expects eventual weakness in companies impacted by higher oil, like FedEx. Earnings are generally okay, concentrated in the tech-AI area.

It's May 4 (Star Wars Day). SpaceX will go public in a few months at $1.75 trillion apparently. When it gets into ETFs, it will dominate many exposures (i.e. QQQ). So, you will hold a very expensive asset in your portfolio. Exciting (mining in space, space travel), but don't expect it to be profitable for who knows? The ARK ETF over 5 years has lagged the S&P and US Aerospace/Defence ETF, which took off in the past year. When SpaceX launches, you will be paying an awful lot for it. Be cautious. Risk: one bad move by Musk could kill the stock. Not sure if he'll buy the IPO.