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

One thing would be reducing capital gains taxes. Those kinds of taxes just stifle development. Have to look at what can be done about growth. Civil service has increased by 40% in the last few years, money being wasted on consultants, ridiculous. 

They've just been shoveling money out the window, and it has to end. That's what he'd anticipate with a Conservative government. At least he hopes so, nothing's guaranteed!

There are several, but he's not a big fan of silver at this point. He hasn't been in gold. Commodity ETFs are quite volatile, so it really depends on the individual investor. What's your asset allocation overall, and how big a position do you want to have in commodities?

BMO will have some very good products. The only thing with longer-term bonds is duration risk. Depends on your time horizon. These days, he's sticking with short-term or medium-term stuff.

Keys to Managing Your Portfolio - Keep Costs Low

This is unlikely to be a surprise to many at this point as it is well discussed and written about. It is worth repeating though, as over the long-term, fees can destroy the value of a portfolio. 

If you consider fees, taxes and tack on inflation, it can be very hard to just break even. Fees are one of the few items totally in an investor's control, so it is something all investors should keep a tight leash on. No all fees are bad but it is important to understand and be sure you are getting value for the fees paid.
Unlock Premium - Try 5i Free

The markets have turned bearish, suddenly changing last Tuesday, as the market break below previous levels of support and moving averages, including the 40-week, and including tech and the broader S&P. The Mag 7, however, is more resilient compared to other sectors as yields rise, including today. Inskip notes that tech bounces back faster than other sectors after they sell off with the entire market. Tech can still report fine earnings. The Mag 7 has a 5% downside cushion before brushing against the 13-week moving average. We've seen inflation scares in the recent past as market climb, but those are the moments to buy, not sell. We could see a rally later, but a narrow one led by tech.

Nice to have two very nice years, but there's a cost to everything. As prices go up, value tends to drop, and that's what we've seen. We're slightly overvalued on PE ratios against historical levels. 2025 will offer opportunity, but we have to be realistic. The Mag 7 contributed over half to S&P returns for 2024.

Those who have benefited from the momentum plays of 2023-24 should be quite careful, lots of air under those stock prices. Unlike quality companies that are well valued against their historical norms, the high flyers don't have that valuation floor you can rely on when markets get scared. 

Make sure we're grounded in our stock choices, in a risk-off mentality. You just have to do your work. It's pure stock-picking and factor analysis as to what's going to drive the market. 

He looks for earnings, earnings growth, positive earnings revisions, quality balance sheets, and strong moats.

He believes so. His small-cap portfolio had another good year. Valuations are quite a bit lower than those in the big-cap S&P 500, both in absolute terms and compared to historical norms. Lots of opportunity there. 

Much is due to smaller companies being more domestically based, so they don't face the huge headwinds of a strong USD. And the regulatory environment is positive. Changes to corporate tax policies will be most beneficial to domestic companies.

In general, try to exclude the political rhetoric and how it will impact individual companies, though you have to be prepared for what might come. With Trump, every 10 pounds of words leads to about 1 ounce of action. To try to react to the words will take you to bad places. Put your noise cancellation headphones on, and let the company do the talking.

Doesn't use them. He likes to invest in the economy and currency of the stock itself, sees it as an advantage. Just look at the past 6 months to see the benefit of having USD investments that come back to investors in Canadian currency.

If you're investing in US companies, but not in its currency, you have to go back to the premise of why you're investing in an economy you don't like. He likes the US market, the biggest in the world with many investment-grade companies.

It seems that good news is now bad news, with ISM numbers being a bit stronger. Now there's concern about rates potentially not coming down as quickly as we'd hoped. Rates can stay higher for longer, and inflation might be a bit sticky, but we're still far away from the 9% inflation we had a couple of years ago.

We're really in a Goldilocks-phase type of economy in the US. Steady GDP, with inflation relatively easing or stable, and consumer sentiment remaining pretty steady. Labour market still pretty stable as well. Earnings remain strong, and that's really the most important key.

Looking at 2025 and 2026, he sees ~12% earnings growth rate for the S&P 500. Mid-caps are even higher than that. Markets in NA, and in the US particularly, are primed to move higher again for the third consecutive year.

We've reached $6.75T USD in money market assets. If interest rates continue to fall, that will provide even more support for equities and a buffer to the economy as well.

In the equity component of client portfolios, he's roughly 70% US stocks and 30% Canadian. The US component has increased over the last few years for obvious reasons, as US markets have done really well and the USD has moved forward too.

Given the political uncertainty in Canada, he wouldn't be surprised if the loonie remained weak around 69-70 cents or even lower. The interest rate differential between US and Canada points to further weakness in the loonie relative to the USD.