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

He has faith that Jay Powell will engineer a soft landing for the economy. Don't sell now, or else you will buy back those shares later for more. Bulls say that wages have barely budged, there are major layoffs happening, Friday's unemployment number was an anomaly, China and Europe are bouncing back, and Powell learned his lesson of Dec. 2018. Bears say that Powell created this inflationary pressure, wages will rise regardless, layoffs are confined to tech, the unemployment number is correct, and a bouceback in China and Euro could fuel inflation.

Oct. 7 saw a confluence of five Fibonacci cycles (potential reversals in the stock market). The week ending Feb. 24 points to a confluence--and a pullback. That pullback is not guaranteed and may not happen, but be prepared so you protext your profits. 4,192 is the current ceiling of the S&P, which the index just touched. The S&P could struggle to break past that. There are signs that this current rally is running out of steam. He thinks that even rallies like this need to take a breather.

We're doing fine without a recession so we don't need one. Inflation is down, job growth is stunning. Tech firms are laying off workers but they are small portions especially in light of the huge numbers that had been hired over the past few years. Google is even hiring in some areas while laying off staff in other areas. Rates could probably go a little higher but it pays to be optimistic and bullish as opposed to bearish. Technically we had a recession in 2022. Actual returns in recessions are hard to know and a normal recession usually doesn't hurt the market too badly. However the ones we've been having lately aren't normal. He feels that a lot of things have peaked in terms of worries, inflation, and interest rates so he will stick with stocks.

Paying attention to US tech sector and recent earning results.
Earnings trends in major US tech companies(Apple, Amazon, Microsoft etc.) will affect Canadian holdings.
Cloud growth still at high 20% growth rate. 
Seeing lots of opportunities in markets, as recent selloffs have reduced share prices.

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It is important to know what the main investing assets are and their differences (i.e. stocks, bonds, real estate investment trusts (REITs), exchange-traded funds (ETFs), gold, commodities etc). Each asset class ‘behaves’ in its own way. Having a mix of these assets provides investors with diversification benefits and helps impk. The mix and weighting of each asset class is also connected to how much risk you can take and the time horizon you set for your goals.

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The trend is that this is still lagging data, seeing last year's results. Numbers have been reasonable -- not blowout, but not as negative as was feared. It's going to be more about how does 2023 unfold as the rise in interest rates gets digested for a full calendar year. 

The story maybe has played out in terms of YOY increases, but the squeezing of the economy has not yet played out. Consumer wages haven't kept up with price increases. Wages have recently ticked up, but on a 3-year basis they're well behind increases in food, energy, and broad CPI. Now increased interest costs are also squeezing the consumer, and we're only 6 months into that cycle. As that plays out across a full year, plus the view that durable goods were stocked up during the pandemic, the earnings story in 2023 gets worse and so does the economy. The market's saying we're going to get both a soft landing and a decline in interest rates at the end of the year, and he doesn't think you can have both. We might actually get neither, and the market is not properly discounting that.

Currently up to about 15% of a portfolio. The big difference from last year is the rate we're getting on cash balances, nearly 4%. At that rate, you can afford to be patient for a few quarters. When rates were low, there was more impetus to get that money invested. Notwithstanding the very strong market action over the past week or so, we may yet see a significant buying opportunity open up. Remember that last year, too, markets looked very positive in the first few months.

When considering what to add to your stable of stocks, first questions are what's already in your portfolio and at what weighting? For portfolio stability, it's really important to be diversified so that different parts of your portfolio perform well at different times. What he's looking for is stability in returns and, therefore, stability in the underlying dividend. A lesson from his mentor: "If the assets are good, management is temporary." This reflects longer-term thinking than the market, which tends to focus on the most recent quarter. Either management will run them better, or a new team will come in and run them better. 

With the warm winter, nat gas prices have been demolished. Nat gas is a commodity that's very sensitive to weather and has very significant short-term cycles. Winter is becoming the bigger variable on demand, with summer demand becoming more consistent due to cooling demand in the US. LNG Canada is bringing a significant export opportunity for all Canadian nat gas companies towards the end of 2025. This will be transformational. He likes all Canadian nat gas producers on a volume basis. His preference is ARX, as it's diversified with undeveloped land. 

Not looking for anything crucial. Rate increases are expected to continue in the US, same as they have in Canada. BOC has shown some leadership by moving first with a smaller amount, and we may see that again today from J. Powell.

Increasing quality, looking for higher ROEs and ROCs and less debt. Increased the number of stocks, going from 18 names to 30. They shifted into better value names, by taking profits in names that had run up and deploying profits into names with more reasonable valuations that pay dividends. 2022 was a very different year that what we experienced over the past decade. Inflation has roared back, interest rates have risen, fears of global recession are as high as they've been since 2008. When the facts change, they change their minds.

His firm doesn't try to predict 12-month returns or set price targets. Instead, they evaluate a company's ability to produce earnings for the next 3-4 year period. In other words, what is its normalized earnings power? So, if the company looks attractive based on its share price and normalized earnings power, it's a Buy. If it becomes expensive, then they tend to lighten up. 

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