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

He's been saying that stocks are looking tired, thought the S&P has broken out and made a new high, thanks to Nvidia. According to the equal-weight index, the rally is getting narrower. Also, historical patterns during US election years show that January and February are lumpy and flat, then the market dip in mid/late March. Given this year, he forecasts that dip to happen in April. Nvidia has pushed it all out. As for the US 10-year yield, will it make another run to back to 5%. Tech remains interest-rate sensitive, though Nvidia is insulated.

If you like a stock long-term and fundamentally and you target a 3% portfolio weighting (i.e. Berkshire-Hathaway), buy that 1.5% on the day you decide it's a good stock. For the second tranche, look at previous lows, like $360 for Berkshire B. But there's the chance it will not return to that low. As times goes by, you can buy that second half; you would have made some gains by then. The riskiest day to buy a stock is the first day you buy it.

The market is in a bubble with tech euphoria. It's a moody market as investors watch earnings and it effects their decisions. Investors should be watching the stocks outside the Magnificent 7. Multiples are also too high.

They're scary. You're selling calls and buying puts. Essentially you're selling a spread to get the yield, but this has all kinds of complications (currencies, option exercise) and wild cards. It's not for him, perhaps for sophisticated investors.

The problem with bond ETFs is that they never end. Bond or treasury bills mature on a certain date, and he likes that.

Analyzing inflation numbers reported this week - rising numbers a concern. Unsure whether 1 month blip, or will resume cooling. Large industrial companies seeing costs come down which points towards lower inflation. Market all time highs not a concern, expects strength in economy to pass through to broader markets (not just tech stocks). Office real estate (Toronto) demand is still poor - work from home trend not going away. 

Market Update:

The US Consumer Price Index (CPI) in January came hotter than expected, rising 3.1% over the prior year, compared to economist forecast of 2.9% annual increase, indicating inflation remains sticky. In addition, the US wholesale costs, the Producer Price Index in January rose 0.3% compared to the consensus estimate of 0.1%, the largest gain in five months, signalling that the inflation fight may not be over yet. The Canadian dollar was 74.20 cents USD. The U.S. S&P500 ended the week up flat, while the TSX was up 1.4%.

All but one sector rose this week. Energy gained 4.4%, while consumer staples and financials added 2.2%, each. Industrials and materials added 2.0% and 1.5%, respectively. Real estate rose 1.2% and consumer discretionary edged up 1.1%. On the other hand, information technology ended the week down 2.7%. The most heavily traded shares by volume were  Air Canada, Bitfarms and Manulife Financial.
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Today's hotter than expected PPI and Tuesday's CPI numbers aren't reason to worry, because the U.S. has economic growth. Inflation is not the problem, and the disinflation trend continues.

Somewhat. We're starting to see industrials, financials, and old-guard consumer discretionary perform. Seeing more market participation, broadening of breadth generally speaking. When you look at the S&P 500 and the MSCI World Index, over 65% of each one's constituents are now above the 200-day MA. That's a good sign.

US election years tend to be decent, particularly if it's a first-term President. Going back to 1950, the average return of the S&P 500 for an election year of a first-term President is 12.2%. 

How goes January, so goes the rest of the year. Going back to 1950, 16.8% average, full-year return for the S&P 500 whenever January is positive.

First quarter of an election year tends to be more volatile. Stocks that have run up may hit an air pocket, and weakness is your chance to add.

Trending lower, even though the number this week was a little higher than hoped for. Interest rates are stabilizing, with debate on how many times US and Canadian central banks will cut rates. He sees multiple rate cuts this year.

Q4 GDP in the US was way above expectations at 3.3%. Labour markets are pretty solid, holding steady at 3.7% in the US.

More difficult to find once the markets have done well, as when the price goes up the yield goes down.

One of the screens he uses for low-beta stocks, with over 5% yield, is that the price is above the 200-day moving average and moving higher. He wants to see this good, long-term technical trend. The beta should be less than that of the market.

First, consider the expense ratios. Hedged versions tend to be more expensive. A non-hedged version in USD should be cheaper. He prefers non-hedged, unless maybe if the loonie were at 80 cents.

Thinks USD will remain firm, and loonie will be in a 70-80 cent environment. So you can determine when to hedge and when not, based on that.