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

Like Covid or the tariff tantrum, you won't get any protection this way. You will rewrite options and get called away and not recovering the upside if the recovery is quick. Don't use these ETFs if you're bearish the market.

It's more likely to fall to $4,000 than rally to $6,000, but he is bullish good long term. Gold bullion is more defensive, gold stocks aggressive. Underweight both now.

Buy the rumour. Sell the news. The attack on Iran was not a surprise. Covid, though, was. Generally, wars have a short impact on markets. Markets tend to price wars well in advance. Since 2013's fracking boom, the XEG has averaged 5% returns a year and most of that has come in the past year and most recently. Don't chase this rally, but take some profits like he did.

That's the $64k (or $64T ;) question that investors seem to have been grappling with for much of the past 3 months. 

The answer is that we don't exactly know. We do see markets starting to price some 2-way risk around the AI theme. Previously, between its inception (which you can roughly date from when ChatGPT went live) to November of last year (when Michael Burry sounded the alarm about circular financing and an overbuild), it had been all one way on anything that looked, smelled, or felt like AI.

But now starting to see markets parse winners and losers. Since November, we've seen an acceleration in selling everything that could be disrupted by AI -- notably software stocks, but also white collar in all its forms (certainly engineering, construction, and IT consulting).

His team were never really all-in AI cheerleaders, nor were they skeptics. They feel you need to take a case-by-case, company-by-company approach as you price in AI risks and opportunities. They're starting to sniff out opportunities in the "baby thrown out with the bathwater" category.

At the front end of the trade, it was all about the semiconductor, designer, and foundry sectors and names like AVGO, NVDA, and TSM. He's taken partial profits in a couple of those names. It's now time to turn to the picks and shovels.

An example of the baby and the bathwater is SHOP; owned for years, sold off, picked up more a couple of weeks ago for his firm's momentum mandate. 

Some business models are on shaky ground. Other business models will endure, and they're being unduly sold off. The businesses of those companies may actually be enhanced by AI, rather than disrupted by it.

Wouldn't be surprised if there were hostilities in the near term. That's already being priced into the commodity with a significant move in bids. Geopolitical tension is what's moved the price of oil about $10 YTD. Absent geopolitical tension, the oil market is pretty well supplied.

Risk (and opportunity) management is about probability and severity. Probability of a strike seems to be increasing, but we don't know the severity. In particular, we don't know if Iran will respond in a scorched-earth way (which it didn't do after last summer's strike on nuclear sites). Attacks on oil production and infrastructure in the region could disrupt the global oil demand balance, which could cause the price to skyrocket.

Geopolitical tension tends to be sharp and fleeting. US action in Iran shouldn't be the reason you put oil in a portfolio. Any company you choose should have more going for it than just the commodity price. For his firm, that's XOM.

It's bifurcated. You have the asset-light tech side, and then there's the asset-heavy buildout side. AI is moving from code to atoms. First phase was chips and core networking. Next phase is physical -- data centres, power grids, electrification, materials, equipment.

Pretty good diversification opportunities at the moment. An interesting regime shift under the surface -- US indices are treading along, but Canadian indices are breaking out.

Canada has a lot of oil and gas, rocks and trees. It's a heavier-asset-based economy, which has added to its outperformance and makes a nice complement for the tech-heavy indices that most people are exposed to.

Investors should have some tech exposure.

Canada represents a nice opportunity, but so does Latin America. Good to add to your diversification. LA has commodity exposure, light tech exposure, and better valuations. With potential for the USD to keep weakening (stated objective of the US administration), that would give international regions some extra torque.

Now, he wouldn't bet too much on the USD weakening a lot more, simply because most market participants are anticipating that. With that type of saturation, we might be due for more of a counter-trend rally.

The world needs to think about how AI creates an agentic world. The work that needs to be paid for won't run over traditional banking rails, but instead over digital assets. While the price of digital assets has been really difficult over the past 5-6 months, under the surface we're seeing the infrastructure and network underpin more and more assets. You could start a position in this area; remember that volatility is very high, so position size is very important.

Can't locate the ticker, but Picton is one of the premier asset managers in Canada. Generally speaking, does a really great job on their whole lineup. He'd be pretty confident purchasing.

His team runs a more diversified portfolio rather than being just in tech. Interesting selloff in software, leading to some quite ridiculous valuations for some stocks.

On the AI side, just because you can build something doesn't mean you can create a viable company. A successful company has to communicate with customers, retain business, and grow that business.

In the US this is a midterm election year, with a president who doesn't want to become a lame duck. That means there will be spending, which will positively impact growth. Like him or not, Trump is a catalyst for growth. So we can expect growth in some shape or form, as we had last year.

In the industrials and infrastructure space, worth a look for the long term.

One reason is to lower debt to facilitate an acquisition, and that would be a positive story. So you have to look at the reasons. In general, the optics are very poor.

If CUSMA gets ripped up, Canada won't be a great place to invest. So you want to have some diversification.

In Canada, for example, we don't have either vacuum technology or pharmaceutical companies of scale. So for access to certain industries, you need to go international anyway.

The market is like the early 2000s with commodity prices soaring, goal and oil near all-time highs, but the flipside (Shopify, Constellation) are impacted by AI. Over a third of the TSX is made up of commodities, just like the post-tech bubble era. The TSX is detached from the economy that's driven by the consumer. Commodity prices will continue to drive the market. Neither good nor bad, but reality. The CUSMA renegotiation this summer will be successful. No doubt, Canada needs the US as a trading partner, but the US needs from Canada steel and lumber. Trump really wants to make jobs in the US, so the car industry is a target.