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

US is spending an exorbitant amount on defense amidst the war in Iran. If you look at what's been attractive in the market for the last few years now, it's been defense. All the NATO countries are beginning to spend more and more in that area. That industry will continue to generate greater revenues.

The questions are how profitable are those companies going to be and who's going to finance them?

In the near term, it's hard to tell what the impact will be from all the defense spending. Tax cuts from the "one big, beautiful bill" are starting to come in. If anything, deficit pressures are going to get larger.

If that occurs, then the attractiveness of US treasuries might become a bit less, which will put pressure on interest rates. That will feed right through the economy.

It'll be extremely volatile. A lot will depend on what's happening in Europe -- demand for energy is going up, and sources of energy are in question. His guess is that the pressures will keep oil above $80 (he could be wrong ;).

Overall, companies will continue to be fairly profitable. He's still very bullish on energy, even though there's some prospect of the Iran war ending (which may or may not happen).

His firm's position fluctuates with the market. In relation to benchmark indices, he's a bit overweight right now.

Long term, he's fairly bullish on energy. Fossil fuels will still be needed. A number of large economies in the world are growing quickly, and renewable power can't fill the gap entirely. Demand will increase for a number of years.

He was expecting a pullback like this for a while, because after a 3-year bull run, he saw valuations rise to overvalued. So, he was raising cash from the frothy tech space. The past month, he bought a tech stock and continued to raise cash. He's ready to pounce. Meanwhile, there remain issues in private credit, layoffs (i.e. Oracle), and no net new jobs being added.

Best way to look ahead from where we are today is to consider which data points are going to filter through for a prolonged period. So, looking at where inflation could be and where interest rates could go over time. Those things will endure longer than any headline events that could resolve quickly.

The oil shock can be temporary, but the lasting effect in terms of inflation is where you want to keep a closer eye.

When you see the market selling off as a whole, there are a lot of stocks out there where that doesn't make sense.

Today's environment gets him more than a little interested in blue-chip companies that deserve higher valuations and have more durable growth rates than the market is giving them credit for today.

The companies that deserve attention are ones that we're all familiar with. This environment is unique in that some of the bigger-cap stocks (MSFT, META, GOOG, AMZN) are phenomenally well-positioned for where AI's going, as well as for their general defensibility. These names are trading at pretty big discounts relative to their own history.

You can pick up low-debt, high-growth companies at pretty attractive valuations. So big tech as a whole is interesting, with specifics determining which names to actually buy.

When you look across the different sets of companies, the bottlenecks tend to move.

AI is the biggest cross-sectional theme we're seeing across the entire market. But where you look under the hood step-by-step, and how that value capture changes, is a lot more important than it used to be.

Here's a simple example. All the excitement has been on memory stocks. But NVDA has seen a lot of relative de-rating, trading at huge discount. The pendulum swinging from where you are in the bottleneck, and all the way back to the core bundler, is an example of what you're seeing in the stock market as a whole.

Geopolitical shocks always create market dislocations. This one, the US-Israel-Iran war, won't last long, he thinks, nor will high oil prices be sustainable, he guesses. Only healthcare services is the only sector seeing job growth the last two years, given aging demographics, while the other sectors see flat or falling job growth. The US labour picture is very tentative. The next part of the cycle will be mass layoffs, not likely this year, but later, and persistent high oil prices could be a catalyst. The Canadian jobs picture isn't robust, either.

He doesn't know when the market will bottom, but the Tactical Risk Monitor does help him figure this out. But the 5,650-5,900 range in the S&P is likely were the S&P will correct into. The markets aren't yet oversold.

100% agree. The tone in the markets shifted in a way that's increasingly hard to ignore. The Iran conflict started as a backdrop, but is now feeding into how investors think about inflation, policy, and risk. Deadline for a peace deal with Iran is also weighing on markets.

Initially felt more like a recalibration. In the US you could see the adjustment unfold as oil prices moved higher, yields followed, and then equities (particularly the most-crowded growth areas). 

The path forward has inflation a bit stickier, and central banks have less room to ease. 

The peace deal deadline scheduled for Saturday has been extended by 10 days to April 6. Talks are ongoing, but both sides have big asks.

She's watching markets closely. Thinks markets will focus on the Strait of Hormuz and transportation of oil. If ships can pass through without fear of being attacked, that should provide a bit of relief to higher energy prices. What would also help is cessation of attacks both on Iran's neighbours and on Iran's energy facilities.

We're in wait-and-see mode. Lower energy prices should bring higher equity prices. That would reduce fears of higher prices flowing down into the economy, as well as fears of the conflict escalating and broadening.

At this point, no. Seeing pullbacks, which are normal and healthy. A pullback is defined as a decline of 5-9%, and they happen 3-4 times a year. 

Correction is defined as a decline of 10-20%. Those happen about once a year. 

Yes, these moves can create uncertainty. And that's the one thing that markets don't like. If we can get clarity or any sort of guidance that a peace deal will form, she can see markets taking off very quickly.

If the conflict is prolonged, that could create sticky inflation and cause interest rate cuts to be pushed down the road. We're not there yet, but she's certainly watching the impact on the economy.

Still likes it. The story has gone from more of a cyclical metal to a strategic asset -- electrification, data centres, EVs are all copper-intensive. We're headed into a structural supply deficit. That macro backdrop makes the whole space really compelling.

One of her favourite long-term themes.