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

He uses relative strength (RSI) to analyze, primarily. SIlver broke out at $35 and peaked at $95. But we're seeing a retracement approaching 50%.

Reality is that the market analysts, from a company-specific basis, are looking at everything that's happening geopolitically as "temporary". That is, companies are not guiding yet towards lower outcomes. Until that happens, the analysts will stay the line. Very few of them are bold enough to say, "Hey, this conflict will have long-term consequences."

No one really knows how this is all going to play out. He thinks it's going to be an issue. Question is how long will it last? There are things you can do about it from an investment perspective. But, typically, that will involve far more sophisticated strategies than the DIY, at-home investor can execute.

He'll unpack this a bit more in the Educational Segment.

In the history of the world, these things are always relatively short-lived (measured in weeks to months). But if there's a clear disruption to the supply of materials through the Strait of Hormuz that turns into years, that would be extremely problematic.

The world can handle a number of months' disruption, but we're already starting to see rolling blackouts and supply rebalancing. The biggest thing that comes to mind is fertilizer for food production.

From an uncertainty standpoint, investors are looking at markets and wondering what to do. We should be prepared for several more months of this. Boots on the ground are not politically palatable at the moment, but inevitable if the US is really going to claim victory.

Trump's current claims are certainly not founded.

Central banks, no matter if they raise or cut rates here, can't move the needle. Rates don't impact, in any remote way, what's happening in the Middle East.

We need a resolution in the war. Because of the uncertainty around added inflation, it makes sense to pause any additional rate cuts. If the conflict lasts longer, central banks may have to get more aggressive at cutting rates because the economy is weakening in other ways. Rate cuts are not the cure for this kind of market disruption.

Excellent question. His answer is that there aren't too many. Most of them are differentiated in the style of how they write. Some are more aggressive and focus on more yield, while some give you much more in capital gains potential because they write on only part of the portfolio.

Great income-enhancing strategies for income seekers. Bring 'em on. What's needed is more education in this area for the individual investor.

He remembers back in 2008-2009 at the time of the GFC, these ETFs were launched as leveraged ways to play commodity markets. 

The danger is the promise of 2:1 daily exposure in terms of leverage. Because of that daily exposure to rebalancing (buying higher and selling lower), they're a bad long-term hold.

An MIC is backed by the value of a person's home. Typically, the loan-to-value is in the 50-70% range. So you have a lot of equity coverage. Whereas when you're lending to a business, you're typically lending off cashflows. 

So the headlines you're hearing about problems in mortgages, they're of the construction type -- where you take business risk. Those types of mortgages will typically generate much higher returns than residential mortgage investment corporations. Only a handful of residential mortgages will default, there's plenty of equity, and the mortgagee will get their $$ out.

Loves them. Great fixed-income alternatives. You'll do far better than with public-market short-term bonds.

So many to choose from. If you believe we're going to come out of this geopolitical crisis/war with bullish global growth, then he doesn't care which banks you buy. They're all going up in every jurisdiction.

But if you believe (as he does) that the job market and the real economy are slowing, regardless of the current geopolitical headwinds, then banks will underperform.

Especially in Canada, banks have run up significantly. Adding new $$ to Canadian banks is something he'd shy away from at the moment. Though you can buy on dips after some period of weakness.

US Earnings Outlook

Outlook clearly driven by capital investment in AI. When you look much beyond that driving force, you don't see a lot of broad-based earnings growth.

He's brought along a chart that looks at the expectations of analysts. For the next four quarters, expectations have started to go up and up. 

The next chart details growth expectations for the 11 sectors that make up the overall index of the S&P 500. Growth estimated to be 16.47% for the index overall. It's mainly coming from the InfoTech sector at roughly 32% of the index. Healthcare (and aging demographics) is the next driver -- the only sector in the US that's really seen job growth in the last 2 years. Together, those 2 sectors are driving about 90% of earnings growth for the market overall. (The energy sector was down near zero until the war started, and then it shot up.)

Every other sector is either flat or down.

This is not a broad, robust economic expansion in terms of earnings. It's really thematic based on aging demographics, AI, and (temporarily) what's going on in the energy market.

Finally, let's look at the total return of the Sector SPDR ETFs, which are linked to the underlying economic indexes. They give you a very different picture. Though earnings were falling, investors were buying into energy and utilities. All the other sectors are in decline. These dislocations provide opportunities.

If interest rates stay tame, as signaled by Jerome Powell, we might be able to buy stocks of companies that are about to report. 

Historically speaking geopolitical shocks and conflict events rarely affect the long term trajectory of markets. In the short term they can have a 5 to 15% draw-down. Right now we're between that. A major oil shock can have a longer term effect of 20 to 30% but he sees that oil prices could ease this year. Energy stocks have done very well so be hesitant to add to them. Look at other areas that are down such as financials, maybe some technology (selectively), and some industrial. The downturn has affected the whole market. The market is really broadening with other sectors taking leadership away from tech. They are moving away from some big tech names and hyperscalers. 

Lots going on this year. We came into 2026 looking ahead to the US midterm elections, always knowing that would bring some volatility to the markets. We had our eyes set on interest rate decreases for sure by the US Fed, and possibly by Canada's BOC. But that shifted immensely in the past couple of weeks, due to the inflationary impact of higher oil. 

Right now, the market is pricing out those interest rate cuts. For the US, that means not till 2027. The Fed's focus had been on the labour market as part of its dual mandate, but now that's shifted to inflation. There are actually some whispers out there that there might be some hikes.

Our market has been resilient. Between oil and gold, we have a natural hedge. Gold was ahead early, tailing off in February. But now we have energy taking the lead and holding.

The composite index has seen a modest pullback. As Canadians we tend to hold more Canadian equities in our portfolios, so we've been somewhat insulated from the global impact.