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

The S&P is 20% off the October lows. Technically, we're in a bull market, but neither the fundamentals nor the bond market support that. He doesn't believe this is a true bull market. Industrials have true earnings strength, but if tech flags, he's unsure that other sectors will carry the load.

Tech, comm services, and discretionary are in a bull market, but not the rest of the market. The gains have been narrow overall. Eventually, this will broaden and the laggards will catch up. Earnings have held in and we're in the 9th inning with the Fed.

The Russell 2000 broke out last week, so the market is seeing the breadth of this bull market. That said, the S&P needs to close above 3,300, and it hasn't yet.

Five to nine stocks have led this bull market, but only in the past week is it expanding to other stocks and sectors. The Fed needs to stop raising rates until we're in a true bull market. The trick is, you need to invest before that bull runs.

Believes US Federal Reserve done raising interest rates for June.
Expecting another interest rate hike in July, or August.
Biggest mistake US Fed could make is raising rates too high (difficult balance).
US Tech is leading market, & making back losses from earlier this year.
Bull market in the USA only represented by tech companies (weakness in markets remains). 

Previous Investment Bubbles: Cannabis.

In 2018/2019, investors truly seemed to believe that every citizen of Canada was about to become a stoner after cannabis was legalized in late 2018. Sales projections were through the roof. Companies were quickly created, raised billions in capital and watched their share prices soar. Large foreign companies with billions of dollars bought into Canadian companies. Then it all popped, very quickly. What happened?

First, it seemed no company could make any money. Most companies were bleeding cash. Second, demand was nowhere near predictions. It turns out that just because something becomes legal doesn’t mean everyone is going to buy it. Third, valuations were just ridiculous. Growth was great for a short period of time, but investors simply paid too much for this growth.

Now, the sector is pretty much a wasteland of company carcasses, Canopy Growth Corp, one of the early winners, was worth more than $15 billion less than two years ago. Today, it is worth less than $900 million.

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He does spend time on it, because his clients expect him to be knowledgeable about it and have something cogent to say. Still, earnings and dividends are the big drivers.

It will be really hard to bring down inflation to any great degree. So interest rates are likely to remain at these levels or close. 

Historically, these interest rates are not bad. When he came into the business, if you had 3% on short-term rates it was awesome, and 5-6% mortgage rates were standard. Things are only high relative to what we've been seeing over the past 10 years. Outside of that, they're reasonable.

He just got a bubble signal for the NASDAQ. As long as the bubble lasts, he'd keep holding stocks like AAPL. When the bubble bursts, and it will, just remember the bubble of June 2020 and the tumble of AMZN and the like. Expect it to happen again, but not now.

For people who don't want to take risk, it' not a bad time to sit on the sidelines. Intrinsic value of US growth stocks is relatively poor. Intrinsic value of Canadian stocks is pretty good, because our index is heavily weighted to oil/gas and banks.

At this juncture, you're doing a bit of gambling if you're in the stock market. There's a bubble building in the AI stocks. We've seen this before. You can have a lot of fun, but when they come down, remember Nortel. Go for value, but this is a gambler's market.

Lots going on in the generative AI space. It involves the cloud and SaaS, and it's a multi-billion-dollar marketplace. The uses can go on forever, from healthcare to manufacturing to the consumer.

But it's still very young, picks and shovels right now. But for those companies that can harness it, it's going to be very powerful.

Quite a bit of volatility. But if you look at the charts over the last 5 trading days, it's flatlined a bit except for the beginning. Spikes up, comes back, spikes up, comes back. Going back to 1983, the S&P 500 has an average gain of only 0.15% in June. If you go back only 10 years, it's around 0.2%, but with a lot of volatility. 

What you're seeing is a lot of rotation. On Monday, the market cap of AAPL equalled that of the entire Russell 2000. It indicated to the market that something was out of whack, and that's perhaps why we saw the surge in the Russell 2000. AAPL's revenue warrants high confidence, but still, something's out of whack.

Financials lack a catalyst now, so he's not excited about them. Generally, he likes Mastercard, Arch Capital Group (performing very well for him), AmEx and JPMorgan, but unhappy with MS and BAC.

Very bullish, so he just raised his price target on the S&P by 250 points to 4,550. Market price momentum will persist. He hasn't been overweight tech since 2019. He isn't late on tech, but rather tech is just beginning. The market bottomed last October and there's 6% upside ahead. He's excited.