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

Tips for Navigating Uncertain Markets: Maintain your Strategic Asset Allocation, stay focused on your goals. During times of volatility like this, it is important to stick to your asset allocation rather than making emotional decisions. Your asset allocation should be designed keeping in mind your constraints, liquidity, time horizon, and financial goals, with an aim to achieve the desired level of return with the appropriate risk level and factors, one is comfortable with. There is some room for a tactical tilt, and other than that, it is best to revise asset allocation only when there is a change in constraint, belief, or circumstances. The market tends to over-react both ways. When numbers and times are good, every investor is an enthusiastic bull and seeks growth and innovation. When volatility hits, investors turn to panic-selling with seldom any thought to their allocations. Changing your allocation based on market sentiment and/or current performance can hurt more than benefit. Reacting to a down market is an easy way to derail the progress made towards reaching a financial goal.
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He is focusing on researching individual companies rather than markets since they are fairly unpredictable in the near term. The S&P is lifted by 7 stocks such as Apple , Nividia, etc. which are not in the growth mode. Retail investors have been coming back in force and gravitating to these big names pushing up their prices. The S&P is above its historical average and the U.S. market could under-perform. Mid caps and small caps are trading at more attractive levels.

The forestry sector stocks are going through a cyclical downturn. However West Fraser's price has held up. Canfor is a different picture and has pulp exposure. Interfor is a pure play and although he has sold his holding, he still follows it. Also Interfor has a lot more insider buying than the other two.
Editor's Note: The question was on forestry stocks.

Editors' Note: The Question was on the rail industry. CN and CP have done very well. They are efficient and have delivered strong earnings growth. They are now trading above their historical levels in terms of P/E multiples so it might be best to wait before buying. U.S. rails are 25% cheaper.

Believes investors are correctly pricing in chance of recession into markets.
Positive sentiment increases likelihood of another US Fed rate hike.
Markets will get shock if rates hike.
Regional bank crisis helping cool the economy - unsure whether more banks will fail.
Moving holdings to large banks like JP Morgan to protect risk of further bank failures. 

Importance of Fundamentals: The best approach for long-term investors amid uncertainties is “worry about the macro, focus on the micro”. As there is a small sub-segment of the market that regardless of what happens with the macro picture, the business will continue to do well (or are only mildly affected), due to such a strong secular tailwind in the business models. Some of the prominent transitions include brick-and-mortar retail to e-commerce, software licensing to software subscriptions (SaaS), programmatic TV to streaming and cash to electronic as a payment method, etc. As long-term investors, these are the opportune times to establish or add to positions that not only persist through the downturn but also come out much stronger when the economy recovers. Therefore, we think the current drawdown could offer opportunities for attractive entry points into these names. 

Not really. They've made it very clear what they're doing. Issue is the notion out there that once the Fed stopped raising rates, it would start to lower rates very quickly, and that's not the case especially with what happened with US financials. 

Real issue is that they have to keep rates higher for longer. Inflation remains an issue, and they need to bring it down. YOY numbers have come down. They really need to keep rates up until they see inflation come down to a reasonable level. Whether that's 2% or not, he's not sure. Probably won't see rate decreases until next year.

90% of the gains in the S&P came from 7 companies, tech companies really. April was a good month. But if you were in consumer discretionary and staples, basic materials or regional banks, you didn't do very well. It's a very narrow market, which worries people, as the breadth of the market is not very strong. Something will have to give.

The other issue is there's also a lot of complacency because the VIX is down around 16. You'd think it would be higher given interest rates, the debt ceiling issue in the States, and the narrow market. You may see more volatility in the stock market, but that's not a bad thing for long-term investors, as it gives them a chance to buy companies they really like at reasonable valuations.

Think about which companies you want to own, and get ready to buy when you see the volatility.

It's a really positive sign. S&P and the TSX are still to clear their February and April highs. His view is that it will hit its highs of August 2022 in the next 2-4 weeks. This is a big deal. If we get above the August highs, it means something's changed in the tone of the market.

For the bulk of 2022, the path of least resistance was down. Whereas now, the path of least resistance is up. 

Exactly. Resistance in February and April, and he's anticipating a push higher toward those levels. There's going to be a short-term pause or consolidation, but ultimately this will lead to a rally that will take us to the 4300 level. 

The chart through October and December 2022, and March 2023, we had a series of higher lows. February highs were above the December highs, so especially if we take out the August 2022 highs, you'll see higher highs and higher lows, and that's the definition of an uptrend.

Under pressure with commodities being pressured. TSX has already moved above its August 2022 highs. If we can take out the June 2022 highs, that would be positive.

The technical pattern that's trying to form is an ascending triangle pattern. The flatline is at the top of the triangle, and the higher lows form a line to meet it. In technicals, this is one of the most positive patterns out there. If we can clear the February and April highs of this year, that's very bullish.

His thesis is that we're starting a new bull market. As we get closer to the August 2022 highs, lots of people who've shifted to a more bullish stance are going to take some profits. If we clear those August highs, that could be an intermediate peak, and the first decent 5-10% correction in this market.

When all the naysayers change their view and put their money to work, that will be a really powerful tailwind for markets next year.

Historically, strong seasonality from March-April-into May. Slowly showing signs of improvement, but it will be choppy. Use tight stops, using previous day's lows. Remains quite volatile. Tailwind of positive seasonality.

Very cyclical. Chart shows that we're seeing a similar slowdown as we saw in 2019-20. He likes accumulating lumber names at these levels, as they look quite attractive.

Investors do the exact opposite of what they're supposed to do. You're supposed to sell your losers and let your winners run. Human psychology makes us repeat the same mistakes. They get the adrenaline rush of cashing in on a gain. Then they hope and pray that a 10% loss becomes a 0% loss. Every 90% loss starts off as a 10% loss.

The biggest enemy for every investor is themselves.