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

The question was on high yield bonds. Yields are in the 8% range and it is a short term asset class. There are occasional defaults. It is important to diversify and include hedging so you should own an ETF with at least 50 companies. Be conservative with fixed income investments.

The question was on gold. He has never owned a gold stock, nor has Warren Buffet. He feels gold has never really been a good hedge against inflation. 90% of it is used for jewellery. He prefers to buy solid companies with growing dividends and earnings. He doesn't like Bitcoin either.

The question was on CDR's for U.S. large cap companies. They may track differently and he would prefer to own the underlying stocks without the hedging. There is a fee but it is not excessive.

He likes retailers in Canada rather than the U.S. Three companies that come to mind are Loblaw, Dollarama and ATD, all of which have great consistent growth.

Believes corporate earnings are most important factor going forward. Slow economic growth as markets react to interest rate hikes. Rising interest rates will continue to compress valuations. Expecting 12-16 month lag in valuations from hawkish US Fed policy.

Tech valuations have fallen a lot, certainly compared to a year ago, but they remain higher than the S&P's 17x PE. You can still buy these names at lower prices. He's neutral tech, but prefers more profitable Cisco and Oracle.

Alphabet just announced layoffs--bad news is good news in this market Remember there's been a ton of hiring previously by these megatech companies but mostly for special priority projects. Yes, layoffs will impact morale at these companies, but will not cut into company growth, and ROI will remain positive in coming years. Layoffs now are a right-sizing of staff.

Recent TSX outperformance. Canada tends to be more value-oriented, when you look at financials, energy, and materials. S&P 500 tends to be more growth-oriented. Looking at returns for the end of last year, the TSX outperformed the US indices by a fair amount, and that's why.

Market volatility. Central bankers don't have the credibility that they once did. That's why the markets bounce around the way they do. On one day, the different Fed officials can talk about different rate hike numbers, singing different tunes. So it's hard for the market to figure out which direction they're going. In the last few days, seems like the focus has turned to "bad news is bad news" and to the economy slowing down at perhaps a quicker pace than people expected.

Rare 2:1 advance/decline ratio last week providing support. Looking at the advance/decline volume over a 10-day period, from late December until last week, there was a 2:1 advance to decline ratio. Probably only 8 instances in the last 50 years. Historically, you can't say it's positive for every single period, but the aggregate numbers are very positive. It shows a lot of buying power that we haven't seen for a while.

Favourite Canadian bank? Doesn't own any banks in his growth portfolios. In his income portfolios, owns BNS and BMO.

Markets. US retail sales number came in down 1.1%. Suggests consumers are starting to feel the pressure of higher inflation, perhaps dipping into savings to fund purchases. US consumer has been resilient the last couple of years, and the consumer accounts for 2/3 of GDP growth.

Outlook for 2023. Hard to say. Last year, all the global indices posted negative returns, with the TSX doing better than most, going down just under 6% because of the energy component. In prior years when there was negative GDP growth, the stock market was actually down in the year prior to the recession, and then up in the year of the negative growth. So the markets are forward looking. The fact that markets were down last year, especially in the US and in tech stocks, reflects concern of higher interest rates. When the economy turns negative for two consecutive quarters, and everyone is anticipating some sort of recession this year, the Fed pauses and starts cutting, so this is actually positive for the markets. It's going to be very bumpy until we get better profit clarity for companies, as that's what's going to drive what happens for the balance of the year. Last year was multiple contraction. October lows will really be tested if companies see demand softening and lower earnings guidance, and so we would have negative earnings growth.