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

Solar ETF's have positive future, but investors need to be selective. Many companies have not been able to earn consistent profits. Good news is that the demand for clean energy is rising. Overall, will be a positive, but investors need to be careful. Would recommend a wide variety of solar ETF's to balance risk on portfolio. On the other hand, oil demand not going away. Selection of traditional energy stocks would also help balance investor's portfolios. 

Cons of the Canadian Stock Market:

1. Limited Market Size:

The Canadian stock market is relatively smaller compared to its US counterpart. This smaller market size can reflect fewer investment options, the potential for sector concentration, and the lack of mega-cap companies. While Canada has some large corporations, it does not have the same level of mega-cap companies that the US market boasts. These mega-cap companies can often drive substantial market growth for innovation.

2. Sector Concentration:

The Canadian stock market has a significant concentration of financial institutions and energy companies. Just about half of the TSX index is comprised between just two sectors, energy and financials. This lack of diverse exposure to other sectors can be a drawback.
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Small caps are trading at a massive discount to large caps which gives investors an amazing opportunity in Canada and the U.S. Volumes are ticking up which means institutional investors are getting interested. Investors looking for growth have the best opportunities in small caps trading at low valuations. He is finding companies growing at 20, 30 and 40% per year but still trading at single digit P/E multiples. Small cap opportunities are in many sectors, not just tech and there is new leadership in the market. In Canada he considers a micro cap to be under $100 million, a small cap to be $100 million to $2 billion, and a mid cap to be $2 to 5 billion. Anything over $5 billion is a large cap. The U. S. is different - those numbers would be much higher since the markets are bigger.

The question was on picking sectors and then stocks, or picking the stocks first. Top down investors look at the macro environment to find the sectors and then look to individual stocks within those sectors. Bottom up investors look at specific opportunities (stocks) and choose ones that fit best based on their criteria. He is in this group. The great investors over time are mostly bottom up stock pickers. He hopes to own a company over a long period of time but watches for slowing growth and an expensive valuation. He looks for increases in his investments of 2 to 5 times. 

Believes stock markets are too high, and investors should be cautious. Alternative asset classes look attractive given recent highs in stock market. USA ETF products are performing very strongly, with Canada equivalents trailing. Innovation occurring at rapid rate in the ETF space. Bitcoin ETF products can be risky, but are offering investors opportunity. 

Pros of the Canadian Stock Market:

1. Stability and Safety:

The Canadian market is known for its stability and resilience during economic downturns. During the Global Financial Crisis of 2008, the Canadian markets, TSX, saw a maximum drawdown less than the US markets, the S&P 500. Canada’s strong regulatory oversight and well-capitalized banks help to contribute to the overall stability of its financial markets.

2. Resource-Rich Economy:

Canada is rich in natural resources, including oil, minerals, and timber. It boasts vast oil and gas reserves, making it one of the world’s leading producers and exporters. Canada is also rich in minerals such as gold, nickel, copper, zinc, iron, and others, which date back to some of Canada’s earliest industries. Investing in resource-based companies can provide diversification, and this can help investors gain exposure to traditional sectors like oil and gas and metals and mining.

3. Dividend Stocks:

Many Canadian companies have a strong tradition of paying consistent dividends. This can be appealing for investors seeking a steady income stream.
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His team has been focused on the sustainability of the rally. It's been a pretty amazing Q1, so they're trying to see what's ahead. We're well ahead of the typical election-year cycle, so that would indicate that perhaps we consolidate a bit. He's micro-focused on earnings growth, and that's coming through.

When we think about the M7 and the S&P 493, until recently all the earnings growth was coming from the 7 companies. So last year, people were complaining that the breadth was narrow, that those 7 companies were lifting all boats. But it was grounded in fundamentals.

Now we're seeing growth outside of the M7, which should lead to a continuation of the broadening out we've seen. That's healthy. We want more participation in the market.

The difficulty with the US, in particular, is that it always trades at a premium. And that's justified by its really good businesses. He thinks there's a lot of potential in Canada and Europe -- regions that are tilted less toward tech, and more toward cyclical/value like financials, energy, and whatnot. Those areas can benefit.

He's been seeing strength in Japan for a long time, which could be due to people avoiding China, so there could be some push/pull there. Definitely seeing opportunities across the globe.

For his core positions, you want to trade around them. If the thesis hasn't changed, story not broken, you want to maintain the core position. But if it gets expensive in absolute terms relative to itself or to peers, then you can take some off the table and recycle proceeds into a competitor or an undervalued peer. 

This is a good way to protect yourself and to have some discipline around the valuation.

Solid performance this year. Miners have lagged, people have been waiting for a revival, and this could be it. He's worried about what gold is telling us, why is it rallying so much? Combination of concerns about resurgence in inflation, along with government balance sheets still elevated. So people are trying to diversify.

He doesn't use them. Have to think about fees and volume. Same dynamics you'd think about with a stock listed on a foreign exchange vs. its ADR.

Industrial technology is going to become more and more important. Factory automation, sensors, internet of things. AI is really about productivity. These are productivity and cost-saving engines, increasing uptime. For example, by attaching sensors to a turbine, you can get ahead of maintenance before it becomes urgent.

His view is that since the generational low in rates in the early part of 2020, everything has changed. For 40 years, the power was in the hands of the borrower, and we went to a world where the power is in the hands of the lender. The economy is likely a lot more resilient in the face of inflation or higher interest rates.