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

On a rate cut, buy residential, not commercial, and maybe industrial.

Recent economic data out of Canada shows that our economy is decelerating at a rapid pace. With the bank earnings and potential credit issues, he prefers the US market over Canada's at this point. If the BOC does move ahead with a rate cut in June, as is highly anticipated, that could change his viewpoint. Markets typically will perform pretty well after a rate cut.

But for now, he's more inclined to be in the growth-oriented industries, specifically tech and data centres in the US. Less favourable on the value sectors such as financials and energy that predominate Canada.

He's not sure if it's a lower-volume May to September kind of trading environment, but while we're seeing pretty good results from major companies, the market just hasn't loved some of those results or the forward guidance. See his Top Picks for a company that had good results, but has come down quite a bit.

You have to pick through in this stock picker's market, looking for undervalued opportunities in names that have moved too much on not-so-bad earnings. Volatility is there a fair amount. Keep your eye peeled for opportunities that could appreciate fairly significantly.

It can vary client by client. At certain times, you just don't want an individual to have the risk of owning a stock, where you can see 10-15% moves over the course of a day or week. ETFs are better for broad-market exposure where you're trying to get specific access to an industry or a market. You can then use individual stocks to supplement that exposure, or for companies that you think are going to significantly outperform the market.

Believes interest rate cuts might be on the table from the Bank of Canada (mortgage situation much more fragile). Strong labor markets & sticky inflation not pointing towards US Fed rate cuts. Not until consumers start to weaken will this option be on the table. US Federal Reserve debt load is spiraling out of control - makes rate cuts and/or raises very complex. Currency situation would suggest Canadian Dollar is heading down. 

Nuclear energy is the power source of the future, however Uranium prices are fully valued at this time. Would wait for Uranium prices to fall before buying. Owns Uranium directly and in companies as well. 

Believes Bank of Canada is likely to cut interest rates this week. Canadian housing market is fragile due to 5 year mortgage rates, which would add incentive to cut rates. Canadian consumers much more vulnerable than in the USA. Canadian economic policy poor - reason for economic weakness, and further reason to cut interest rates. Canadian dollar will dip to ~$0.70 before any recovery in Canadian economy. 

Market Update:

Oil prices turn volatile as the members of the Organization of the Petroleum Exporting Countries (OPEC+) plan to extend production cuts voluntarily to stabilize oil prices. On the other hand, Canada’s gross domestic product (GDP) grew at an annualized rate of 1.7% in the first quarter, weaker than expected by most economists at 2.2%, raising the odds for a rate cut in June. The Canadian dollar was 73.14 cents USD. The U.S. S&P500 ended the week down 1.7%, while the TSX was down 0.7%.

Most sectors ended the week in red. Industrials gave up 2.5%, while real estate slid 2.1%. Consumer staples and technology edged lower by 1.2% each, while financials slipped 0.9% and consumer discretionary went down 0.7%. Energy and materials ended the week up 1.2% and 0.7%, respectively. The most heavily traded shares by volume were Lucara Diamond, Suncor Energy, and Canadian Imperial Bank of Commerce.
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Believes there is underlying momentum in commodities at this time. Watching a rebound in the industrial materials & precious metals simultaneously. Strength in energy markets also very positive. Fossil fuels will remain an important part of energy mix for the next 30-40 years. Energy equities presenting a lot of opportunity. High quality junior mining companies will continue to be able to raise capital going forward. Many high quality junior mining companies are over-capitalized. 

Market Update:

Oil prices turn volatile as the members of the Organization of the Petroleum Exporting Countries (OPEC+) plan to extend production cuts voluntarily to stabilize oil prices. On the other hand, Canada’s gross domestic product (GDP) grew at an annualized rate of 1.7% in the first quarter, weaker than expected by most economists at 2.2%, raising the odds for a rate cut in June. The Canadian dollar was 73.14 cents USD. The U.S. S&P500 ended the week down 1.7%, while the TSX was down 0.7%.

Most sectors ended the week in red. Industrials gave up 2.5%, while real estate slid 2.1%. Consumer staples and technology edged lower by 1.2% each, while financials slipped 0.9% and consumer discretionary went down 0.7%. Energy and materials ended the week up 1.2% and 0.7%, respectively. The most heavily traded shares by volume were Lucara Diamond, Suncor Energy, and Canadian Imperial Bank of Commerce.
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No shortage of negative headlines on commercial real estate. Office space was hit because it had capital expenditures rising faster than rents, and then the pandemic changed how we all use office space. 

Other headlines revolve around transactions that occurred in a different rate environment, and how they're working out today. Fundamentals in data centres and industrials are quite strong. With interest rates peaking, you're starting to see more bidders come to the table, construction activity go down, and financing become more available. Interest rates are in line with historic averages.

He's quite optimistic about real estate transactions occurring in the private market. Definitely bullish on valuations of publicly traded real estate.

They do, and they've been quite open about it. Yesterday, a spokesperson said they have $64B of dry powder ready to invest in real estate. They've already privatized 2 real estate entities in the past 6 months; TCN was taken out at a 30% premium. They see private markets as fully valued, but public markets as being on sale. It's an opportunity to put lots of capital to work in a very short timeframe, and to be able to finance it.

He's been doing this a long time, so he's seen a few movies. Any time you see interest rates peak, and fundamentals bottom, is the right time to be buying. Blackstone said that when sentiment is at its most negative, that's the time to step into the market.

We've seen this before: after the 2001-2002 recession, the great financial crisis, and March 2020. When values dislocate, real estate becomes such a great store of value. People look at it as a great inflation hedge. Great opportunity to be buying.

Yes. Almost as if third-party logistics companies thought they could supply patio furniture forever. Reality is that industrial real estate is down 17% from peak pricing. When he looks at public markets, industrial REITs are down 30-40%. Over-discounting what is really a temporary slowdown in decision making by tenants. Spread between in-place rents and market rents is quite wide, ability to capture a lot of cashflow.