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

Believes US midterm elections won't impact financial markets too much. Gridlock in Washington (Congress swinging to Republicans) will prevent too much spending. Chinese economy, inflation and US Fed policy much more impactful on financial markets. Expecting further lock downs in China that will impact global markets. Too early to determine if we are at the bottom of the recession. Earnings headwinds are presenting themselves with stronger US dollar.

Educational Segment. Not bullish on traditional energy and believes clean tech offers better long term opportunity. Believes structural decline in traditional energy. Would prefer am ETF than combines both traditional energy and new clean tech names. Debate between traditional energy and new energy is not one or the other - need both sources.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Time vs. Timing. Our clients always ask: “Is this a good time to get into the market?” We — almost always — say yes. Equities have provided substantial long-term returns over time, even if you buy just prior to a crash or a market correction. No one knows if the market is going to crash tomorrow, or soar. You can guess, trade, pay taxes, go to cash, borrow money to buy, buy technical trading software and so on, and none of it is going to improve your market predictive ability. Just invest what you can when you can and see the benefits over time. The lesson: stay in school (stay invested).

There are signs that the worst of inflation may be over and that the central banks may be slowing rate hikes to see what their impact has been so far. However there may still be more rate hikes. We should see prices start to stabilize. Investor sentiment is the most negative since the financial crisis. Markets can turn very quickly so stay fully invested. He has seen very safe sectors have a major sell-off in the last few months - such as telcos, pipelines and utilities. This provides good valuations and many opportunities. Also opportunities with small and mid cap companies that have been thrown out with the bathwater.

Economy is in a strange position - hoping for weaker economic data, so central banks can stop raising interest rates. US Federal Reserve hawkish stance will be tough on macro economy. Thinks there is division within US Fed on interest rate increases. Too early to determine whether economy is at the end of increasing interest rates. Forward curve still projecting high interest rates.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Share Takeovers Can Backfire. Yamana Gold Inc. recently agreed to an all-share takeover by Gold Fields Ltd. The transaction calls for each Yamana share to be exchanged for 0.6 shares of Gold Fields. But Gold Fields’ shares were US$12.20 ($15.86) each the day before the announcement, and are now US$8.75 ($11.38). Because the takeover compensation is in shares, Yamana shares, even with an announced takeover premium of 37 per cent, have fallen to $6.21 from $7.03. I would get pretty depressed if I owned shares in a company that received a takeover bid, and my shares fell 13 per cent. Of course, things could have gone the other way, but the lesson here is that in a share-exchange takeover, you are still at the mercy of the stock market. Share-exchange deals happen all the time, and don’t require debt, but they can still be risky for shareholders in the target companies. A secondary lesson: Cash does not drop in value.

Bullish on USD. In theory, the US should be deflating, which we see, while the rest of the world (including Canada) will inflate. Numbers indicate we're inflating, but anyone looking at companies sees a plethora of layoffs coming, and so on. We've had two quarters of negative growth, which is the old definition of a recession. So everyone sees the economy slowing down, businesses are cutting head counts, controlling expenses. On the other side, the rest of the world is inflating because as the USD picks up, things get more expensive. For the US, the stronger USD makes their imports cheaper.

Client portfolios. Up to half his client assets are in USD assets, so they have yet to feel any of the impacts that the markets are feeling because of currencies.

Central banks and inflation. Everyone sees a recession, but inflation is stubbornly high. Central banks aren't going to quit, and asset values have to be lowered, since no democracy can go with 15% annualized inflation. People would be in the streets. Already labour is wanting more money. Only way to lower inflation is for central banks to take out liquidity and reduce the market.

Macro is king right now. Macro is in the driver's seat: interest rates, oil prices, bond market. For every stock he can mention, no matter what the metrics are, if the macro doesn't work out, none of the stock picks will either. This is not a stock-picking market. It's a macro market, and we have to figure out the big picture before we drive on.

Uncertainty on commodity producers. He has a little bit of oil in his funds, after huge gains over the last 2.5 years. We need some signal where we're going on the economy, recession, interest rates, currencies. 2.5 years ago, these companies were so cheap. But if you were a portfolio manager and you had Canadian oil & gas, you got fired. They came back with a vengeance, but now they're at a level where he's hesitant. Need more visibility on growth, company investment, exploration. Tough to invest in this space until we get the bigger picture going forward. NTR cutting guidance today is a good example of that.

Market volatility. People talk about investors hating uncertainty, but he can't remember a time when it wasn't uncertain. We're just into a higher degree of uncertainty than we were used to in recent years. Everyone's waiting for the Fed, but he believes they've already priced in 75 bps. Looks like they're pricing in 50 for December, but who knows? The big thing that's hurt the markets this year is that a rising rate environment is like gravity to valuations. As rates go up, valuations come down. As long as this exists, it's going to put pressure on upward mobility of markets. You want to invest in those companies that are going to make it and are more profitable in the short run. Companies with profitability way down the road are going to get hit the hardest in this type of environment. We're probably into an uncertain period for a while due to impact of pandemic, supply chain issues, and the war in Ukraine.

Inflation. Inflation goes up, but it doesn't tend to go down that quickly. Inflation might go down, but prices aren't likely to come down too much, unless you get a recession and demand pulls way down. We could well get a recession, but with all the shortages, he's not sure how much downward pressure that will put on pricing.

Long-term shortages. Next day delivery could be a thing of the past. Talk to anyone who's tried to buy a car in the last year. There may be a wait to get the parts to finish that car. It will take years to reorganize supply chains and set up manufacturing with strategic alliances to ensure you can get commodities, products, or services.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Number of Securities. For many large indices, changes in the holdings are known ahead of time to maintain transparency and easy replication. However, they do come at a cost to the ETF or mutual fund. The higher the number of securities, the higher the trading costs, and the more work it takes to maintain replication (especially if some securities are relatively illiquid). Frequently, ETFs or mutual funds intend to replicate the performance of a select index via sampling, i.e. select a subset of the total index. In that case too, the higher the number of securities, the higher the performance of the investment deviates from the intended index