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

Definitely. He's looking for earnings to accelerate in 2025. Even for 2026, some Wall Street strategists are expecting double-digit earnings increases of 12-13%. A lot of it will come down to how much easing we get from the Fed, and how the new administration changes regulations and such. Expects the 2016 tax cuts to continue. But what additional tax cuts will be implemented?

All that has to be balanced against the risk of widespread tariffs that will upend the global economy. Tariffs are a concern, but who knows which ones get implemented. He's not avoiding companies with tariff risk, as he doesn't think tariffs will be as bad as feared.

Yes. In his global fund, about 20% is allocated to European companies. In general, European markets trade at a lower PE multiple, but that's mostly explained by the makeup of the companies. They don't have the Mag 7 type of technology companies; they have a lot more construction, materials, and heavy industry.

What he's seeing is a European consumer that has a very high savings rate, much elevated over historical levels. The inflation picture is improving, and the rate picture should improve. This will lead to a more robust economy and consumer. There should be some nice opportunities for companies in Europe as the economy picks up in 2025.

The sector sets up really nicely for 2025 with rates coming down. Will be a bit of messiness around the next quarter with slightly elevated loan-loss provisions. Investors are already looking through that to the back half of the year.

Definitely. Multiples are extremely high relative to historic norms. We've had a few stocks driving the markets the last few years. Great market last year where returns were quite high, and another one this year. People should really be looking for quality companies, ones with very good financials and businesses that can withstand a bit of backup in consumer spending and other spending.

Overall, people should be a bit wary. As well, threats of tariffs recently would be somewhat inflationary. That could really put a pause on interest rate declines. Consumer debt in Canada is at all-time highs.

He can't remember two years back to back like this. It's really been exceptional. We had the dotcom boom back in the 1990s, and the real estate boom, but they didn't drive markets anywhere near to what we're seeing today. 

Seeing stocks like TSLA with multiples around 170x, and NVDA at 54x or so. It's pretty extraordinary that people are willing to pay that many years forward to acquire an interest in a company.

On tariffs, Canada has an advantage because we provide a lot of oil and gas to the US, as well as electricity. This supply is critical to the US, so it's a good negotiating chip. Believes that, at the end of the day, our energy companies will be a bit more insulated than first feared when tariffs came up.

Tariffs would be extremely inflationary, and that's something Trump is trying to avoid. But slapping tariffs on everything doesn't seem to worry him too much. The threat of tariffs is a negotiating ploy.

Likes the banks right now, a good place to be in troubled times. Yes, we do have to worry a bit about credit quality with the possible resurgence of inflation. But the banks always seem to pull through.

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We're generally in a time of easing interest rates over the next little while. How fast they're going to do that is the question. There was a perspective that the Fed would be easing a lot faster, but they may have to step back a bit before they commit to more easing. With the new administration and talk of immigration policy, tariffs, and so on, the Fed doesn't know what the economic backdrop will look like.

It's easy to say we're going to oust or limit all these people, but that has an impact on a lot of sectors of the economy. Tariffs may have a benefit short term, but long term there's more impact on inflation, etc. Musk and his department are saying they're going to change the way they lay off people, but unemployment going up will have a big impact on the economy.

Canadian economy is in worse shape than the US. Rate cuts may slow down a bit, but they have to bring down rates another 100-150 basis points from where they are today to get the economy going. This has an impact on the CAD. 

Trump says something about 25% tariffs on Canada, and the loonie weakens considerably overnight. Though it has bounced back, reality is that there are a number of things going to be affecting the Canadian dollar in the next little while. The CAD is going to be weaker going forward.

The DRIP is more about your financial circumstances and where you are in the life cycle of your wealth.

If you are a younger investor and don't need the income to live your life, the DRIP is perfect. It allows you to buy more shares in a company you really like by dollar-cost averaging every quarter. But if you need the dividend to live your life, then the DRIP is not as useful.

Sometimes when he talks to fundamental analysts, they say that things are overvalued. Reality is that you can't fight the tape. Right now, the market's making higher highs and higher lows, new highs, and above the 200-day moving average. 

Even if you look at the internals, market breadth is no longer all about tech. The momentum trades are not overly overbought. Sometimes even market sentiment can send out a signal when people get too boisterous, but it's not.

It's really kind of a Goldilocks time from a technical perspective. The only thing wrong is valuations, but don't argue with the tape.

He uses weekly charts to do his macro analysis. Standard stuff like MACD and RSI. Sentiment indicators like the put/call ratio, VIX. Put/call, for example, is roughly in the middle of its range. Nothing is screaming at him that says we should be worried too much from a technical standpoint. 

A fundamental person would get you all scared, but when the market's going up you have to be invested.

Definitely important, but not the only factor. Right now, seasonality is positive for the next 6 months. December, in particular, can be very good. 

He likes a 3-year chart, as it gives you a more complete picture of the story. Your view can change when you take a longer perspective than just 1 year.