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

Tech stocks got totally beat up last year, but had a great rally in Q1 on the view that rates are going to be cut, no matter what the Fed and other central banks say. They've factored into the forward interest rate curve over 100 bps worth of cuts by next year at this time. That's quite a reversal, especially when they're all talking about higher for longer. 

Someone is wrong on this. Central bankers just need to stick to their game plan because they don't want to take the chance of re-igniting inflation, which happened before when they eased off too early.

Lots of balls in the air. That's why we look for ways to make money, or at least not get beat up too badly.

US firms overspent on content, levered up massively. He prefers Canadian telecom at this point, like BCE, Rogers, and Telus. Telcos are always going to be under regulatory scrutiny.

He's more inclined to be a buyer of the big money banks, both Canadian and US. TD and BMO would be at the top of the list, as acquisition pains have given both better valuations. 

Canadian banks have proven themselves. Crisis after crisis, they come through. They haven't had a really negative time since the real estate debacle of the 1980s. Very good at managing risk, not being overly aggressive, stability, secure oligopoly. Balance sheets are in great shape. Came through as heroes after 2008-9.

Insider trading reports are a great indicator. People sell for a variety of reasons, but there's only one reason an insider buys a stock. It's cheap, and it's going higher. He prefers insider buying reports to corporate buying, as individuals are putting their own money on the line.

One of the problems is that investors are emotional before they're rational. Putting Canadian banks in the same bucket as US ones is wrong. We have a very regulated sector which has consolidated a few banks, and that's a good thing. 

If you look at the US, it's not the big banks that are the problem; it's the smaller, regional banks. The US has 13-14,000 banks, and the bigger ones are stress-tested every quarter. The regulations around big US banks are very similar to ours. SVB was a concentrated, regional bank. It's not like 2007-08, where Citi Bank was going to go bankrupt. We're in a different world now. It might make them think how to increase regulation in the US.

He's surprised. He assumed that the regulators would feel much more comfortable having a regional bank in the hands of a large player like TD as opposed to being on its own. So he's not sure why people are so worried. It remains to be seen if they buy it for a lower price. TD owns part of SCHW, which is having its own issues because of the banking crisis going on, but it's a very different business altogether.

Yes. They've come down for Q1 and Q2, but Q3 and Q4 are basically up. If you believe there's a slowing of the economy, you should have some kind of recession in earnings. If that's the case, you'll probably see a further pullback in the S&P 500, and that will let you buy stocks at a reasonable multiple. 

This is a great time to look at companies, as their multiples have fallen. You can buy stocks you really like for cheaper. When stocks are going up indiscriminately, that's a hard time to be an investor. Now's a great time to be an investor.

He finds it very confusing. Even if people are working 3-4 days a week at the office, you still need the building and the space. How do you get rid of it if you have all your staff coming in 3 days a week? It's a complicated issue. How do you manage this whole process? What's going to happen in the next 6-12 months? A bigger issues with a place like Toronto is that a lot of real estate is coming on with new builds.

The market is forcing legacy combustion engine companies to move to EVs. There are complications down the line. Everyone goes on about how clean EVs are, but making them is actually very dirty.

Fertilizer companies are having a tough time because there's a sense that the economy's slowing down. Tend to do well in times of strong economic growth. Pretty good time through Covid due to lack of supply. Better run than they were before. A chance to own them cheaply. He doesn't own any.

With a slowdown in the economy, oil will trade around between $70-80. OPEC cut production, but those things tend to have a short-term impact on the oil price. Oil demand continues to grow, and production is not growing as fast. So you're probably going to get higher prices for oil over the long term.

Will That Takeover Go Through? Most investors are happy when one of their companies receives a takeover bid. But any bid has uncertainty. As we like to say, no deal is really done until you receive your cash. All takeover bids require shareholder approval, but many require varying levels of government, regulatory or antitrust approval as well.

Microsoft Corp. has been working on getting approval for its proposed takeover of Activision Publishing Inc. for 14 months now. Magnet Forensics Inc. shareholders are fighting its proposed privatization, as are shareholders of Canaccord Genuity Group Inc., where several directors have already resigned.

Toronto-Dominion Bank announced the acquisition of First Horizon Corp. more than a year ago, and now finds its target company caught up in the U.S. banking crisis. First Horizon shares are about US$16 today, well below TD’s bid price of US$25 in February 2022, indicating many do not expect this deal to close as is.

$2 is not the floor, but $1.75 is. We need a real hot summer to get nat gas back to $3.

Growth stocks offer the best opportunities in what will soon be in a secular growth market. The Nasdaq wants to get going, but is held back by rising interest rates. But we're seeing green shoots from companies reporting not-good earnings, but then reporting more positive announcements. Growth is the place to be in the coming 2-3 years after value did well. We're seeing a changing of the guard. He sees the S&P at 3,700 at the bottom and 4,125 at the top (resistance). So, if the S&P cracks that resistance, we could see a 10% move up. The S&P is hitting resistance right now. Interest rates need to hit 5.75%-6.00% to vanquish inflation. But oil's move upwards (caused by OPEC+) and China's reopening could fuel inflation.

Believes US Fed policy is most important aspect of the market right now (interest rate direction).
Bank turmoil in the USA also affecting markets in a major way.
Less money in lending (higher interest rates), will reduce capital available in the markets.
Expecting a recession with higher interest rates. 
US Fed pivot (reduction in rates), would suggest downward pressure on stock market.