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

She's looking at the sector, but hasn't found the right investment vehicle. When an area becomes topical, valuations get ahead of themselves. Has a lot of potential, especially with EVs.

Pretty much like August and part of July, sort of range bound. The S&P and the NASDAQ have been either side of the 50-day MA, kept in that band of 1-2% above and below. Hopefully, today we get a breakout, though he can't predict which way it will go.

The recipe and ingredients are there for a breakout, either higher or lower. It will all come down to the press conference after the Fed rate decision. If J. Powell is more hawkish, markets will probably test on the downside. If he's not, we might get a bit of a rally. The market just has to break out of the range it's been in for the last 7-8 weeks.

Not at all. A year ago, he was talking about generative AI that could be the next catalyst to come in the technology arena. And that's what happened. 

The sector has matured, because you know who the players are. You have the hyperscalers with the cloud, and you have the processing names like NVDA and AMD and INTC coming in. In 2024, new chips will be coming out from those names and they'll be quite competitive. And then you have the software stack. It's all coming together, but you can see who's in the leadership position.

With interest rates high, and potentially going higher, you really have to stick with the big names that have the deep pockets.

Not a big fan of ETFs, because there's a price to go in and a price to go out. Outlook for the remainder of the year and going into 2024, we could be range bound. You could buy the QQQ or the NASDAQ futures. If we're range bound, it's very technically driven, so you have to know where resistance and support are.

Diversification:

A concentrated portfolio is one way to build high wealth, but it is also a way to surely go broke if things don’t work out as expected.

Many dividend investors learned a hard lesson last year when nearly every dividend stock declined at the same time as interest rates soared. Technology investors are used to getting crushed every so often as tech stocks tend to be highly correlated. Investors who loaded up on real estate when interest rates were near zero are now getting a very painful lesson in how lack of diversification can hurt.

It is commonly known that diversification reduces risks, but investors still forget. We’ve seen investors with six bank stocks who think that’s diversification (hint, it’s not.)
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There are many knuckleheads who expect the U.S. Fed's Jay Powell to give a massive all-clear buy signal to the stock market. Gimme a break. That won't happen until inflation stops for six months--and we are far from that happening. No, the Fed hasn't beaten inflation yet. Mortgage rates are still high, the housing supply and labour market are still tight. Inflation stands at 4%. Pundits like hedge fund managers are out of touch with everyday (rising) prices that impact typical working people. Powell will raise rates until those prices come down, even if there are lots of layoffs (though prefers not to). He's doing this because hot inflation is more painful than layoffs.

United Auto Workers strike will result in higher car prices. 
Rising costs in labor will be passed on to consumers. 
Technology will help car companies cut costs. 
Believes raising interest rates in solution to higher food costs.
Canada major importer of food and is caught in a tough spot.
Federal government intervention not required for food costs.
Expecting a US Federal reserve "hold" on interest rates next week.

Believes energy stocks are fully valued at this time.
Good time to sell energy on strength (economic hard landing coming soon).
Energy will outperform the next 5 years.
Would not recommend chasing strength. 

Believes upcoming US Federal Reserve meeting will not result in interest rate hikes.
Pain on main street (job losses) has not occurred.
Believes higher interest rates are required to slow economy down.
Expecting economic hard landing on the horizon.
Stock price P/E ratios need to fall in order to align with historical averages. 

Understand your investments:

Warren Buffett said it best: “I never invest in something I do not understand.” Seriously, how many current cryptocurrency investors do you think actually know what they are doing? We always get customer questions on market-linked guaranteed investment certificates or principal-at-risk notes. Even with 40 years’ investment experience, we can barely get through all the documentation and risk disclosures that come with these products.

There are now leveraged single-stock exchange-traded funds (ETFs). There are leveraged ETFs where you are promised two or three times the return of some specified investment or index. You can buy ETFs that go up when the market goes down, or ones that go up if volatility increases.

We like to keep things simple. If you can’t explain an investment to your 10-year-old, you are probably taking on too much risk.
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Oil's steady move up could affect the Fed's decision on rates this Wednesday. Diesel prices have gone way up and refineries may move more into diesel production and away from gasoline production. This will drive gasoline prices up even more, so therefore more inflation. This then leads to less disposable income for discretionary spending and creates a more dismal view for investors looking ahead to 2024.

Interest rates are indeed contributing to higher rents and the lack of house-building, but cutting rates will encourage inflation. Inflation will likely be around 3% for the next few months and unlikely that North American central banks will raise rates further. Expect an easing of longer-term bond yields as institutional investors lock in yields. Recent data on employment and consumer spending is mildly positive. Q3 will be mostly as expected. AI stocks are ahead of themselves. Expects interest rates to fall, and an uptick in beaten-up high-yielding utilities, pipelines and banks. But oil prices remain a wild-card, though crude and natural gas outlook is mostly positive.

Investors should be weary as markets could be choppy going into Q4.
Lots of pressure on consumers with slowing retail sales.
Student load payments & mortgage renewals weighing on economy. 
Soft landing of the economy not a guarantee.
High energy prices expected to remain as Saudi manipulates markets.

Have the correct investment expectations:

Risks widely vary across investment markets and products. Be wary of implied rates of return that sound too good to be true, because they probably are, at best, very high risk or, at worst, complete scams. Many investors get attracted to high yields: some derivative products have current yields of 15 per cent or more. But past and current returns are not the same as future returns.

A realistic long-term return for stock investors might be in the eight-per-cent range. For a bond investor, five per cent or so. Don’t chase returns. Don’t envy someone bragging about 20-per-cent returns — they are not you, and they might be taking on huge risks.

But if things do work out for you as an investor, don’t get greedy. If one of your stocks has soared, that’s great, but it likely now represents a big portion of your net worth. As such, any future disappointment in that stock is going to be far more painful. In addition to maintaining realistic expectations, we would also maintain portfolio balance and discipline — always.
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