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

Since 1928 on average, S&P 500 has a correction of at least 10% in a typical year, and 3 pullbacks of 5%. Volatility we've been seeing, down about 4%, is very normal. We will see these pullbacks and corrections throughout the years. 

Yes. We're looking at almost 7% profit growth in the US in 2024, and 14% in 2025. We want to pay attention to corporate earnings. Had a really great move from November through March, so no surprise that we're seeing a little volatility in the markets today. Markets and investors are digesting some of those returns.

Good news is that we're seeing more participation outside of tech and communication sectors. Recall that 2023 was all about tech and communications. Now other sectors are participating, which is great for investors.

Near term, be slightly guarded in how you deploy cash. Allow this consolidation phase to play out a bit before the next leg of an upturn happens.

Certainly lots of dry powder in money market funds. $6T is near historical highs. That can fuel further stock gains later this year. If rates start to come down a bit on short-term notes and money market, perhaps some of those funds will shift into equities and bonds.

55% US equities, 30% Canada, 15% elsewhere. He's been overweight the US for quite a while. US has better depth, better earnings, and a stronger economy. Plus a bigger sandbox to play in. The USD has helped in terms of the currency moves. 

He'll probably continue to be overweight US relative to Canada.

Sometimes ETFs in the US will have slightly less expensive MERs compared to Canadian counterparts. If looking at the S&P 500, it's not a cheap index at this point. You want to be very selective in terms of the names you own. S&P 500 as a whole is about 27x, rich. But it's also very heavy in tech, about 35-40% in true technology names. And the tech sector is around 7.5x price to sales right now, expensive.

Right now, he doesn't own any S&P 500 ETFs. He'd prefer an ETF with a quality factor that looks at quality names, such as QUAL.

Makes sense to hold some technology, as we've seen momentum over the past year. However, in the past few months, tech hasn't necessarily been a full leader. In fact, over the last month it's been at the back of the pack. Perhaps an opportunity to purchase, but be very selective with your names. He owns GOOG, AMZN, NFLX and MSFT, but no AAPL, META or NVDA. 
 
Looking at the index, average price to sales of the Mag 7 names is 6.5x, PE is 36x. Pricey. The S&P is closer to 2x. Be careful of what names you own, what the growth rate is and, more importantly, what your portfolio allocation to tech is.

Yes. Seeing a bit of a pullback from the most recent high at end of March. April hasn't been great, and so far May is not off to a great start. 

Probably positive for the medium- and long term. A bit of a cooling off period for some of these stocks to come back, as they were over-inflated. A time when you can do some buying and probably do pretty well on some names.

Yes, that area is not his preference right now. For the most part, earnings have been good. AMZN came through with solid earnings last night, GOOG was good last week, META not so great the week before. But overall, both the earnings power of those names and their ability to cut costs exceed some other companies. They'll be benefactors of a strong market rally, hopefully sooner rather than later. 

Yes. Primarily because technology in a slow-growth environment will typically outperform. There are different tilts to growth or value throughout the economic cycle. Right now, his preference is to tilt towards growth-oriented stocks. This traditionally takes you more towards US markets and tech names.

You need to have medium-high risk tolerance to own names in this space, as they have more pronounced swings.

He just boosted his exposure to energy, now owning 13 names. If oil continues to trade at $65-85, that's perfect for the oil stocks though, yes, there could be pressure on these names. He just boosted his exposure to financials from 8.8% to 23% over a year. This includes regional banks.

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Is critical of Ottawa's latest tax changes, because it disincentivizes wealth accumulation and entrepreneurship, those who creates jobs. This will encourage flight risk.  Canada is seeing slow economic deterioration as unemployment and credit card defaults slowly increase, but there is no major systemic risk or irrational moves in the stock market. The U.S. is in a much better economic space with a strong consumer. He expects some, but not substantial interest rate cuts. Meanwhile, the Canadian government is spending which is inflationary.

He expects further upside for the stock market will be limited due to a few headwind concerns. Economies in many countries are weakening. The U.S. consumer has been running down their savings. However he would be a buyer on further weakness. He feels that the next direction of interest rates is down since inflation is moderating although there are some blips at times. Rates decreases may not necessarily happen soon. The wealth effect of the market going up is much higher than decades ago.