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

US banks. He's overweight. Represent 11% of the S&P, and he has 14-15%. Cyclicals, but they'll do well as we rebound out of a recession. Things are difficult now, but you always have to look forward, and the market's starting to price this in. Banks are great early cycle stocks. See his Top Picks.

Cruise lines. Lots of worries. Is this industry really as healthy as it was in 2019, and the answer is definitively no. The whole industry issued a lot of stock and borrowed high-priced money. Not in good financial shape. The healthcare side is an overhang, and any hint that we're having Covid 2.0 will be devastating. Travel numbers are red hot, but the cruising industry isn't keeping pace.

He expects the Fed to raise rates by 75 points in November. The only way they will lower that to 50 is if lower inflation numbers come in. The market has been rallying this week on hopes that the Fed will raise less than 75.

OPEC to cut production by 2 million barrels a day Long-term, energy and healthcare make sense. Earnings season will be difficult. Last week may not be the bottom. Be diversified in energy--in oil, natural gas, producers, refiners and pipelines. There is conflicting policy globally, creating a lot of stress on future supplies that can't endure. We've never seen this.

She and the market are concerned that companies will guide down in the coming earnings market. She's also keeping an eye on the US Midterm elections. It's a mixed story in the coming weeks. She expects continued volatilty, so she's cautious, until we see inflation move down.

OPEC to cut production by 2 million barrels a day She's slightly underweight energy, but is targeting the oil refiners. Also, the integrateds are a steady way to play energy.

Markets. Challenging year. During times like this, step back and look at your time horizon. Not time to panic and throw in the towel. A lot of the work should have been done ahead of this 20% drawdown to make sure you own high-quality businesses, lots of cashflow, still paying or growing dividends. Next few months are going to be quite volatile.

Deploying capital. If your time horizon is north of 5 years, this is a great time to start adding to your portfolio. A lot of names he's followed for years, but they've now come back into that valuation range that he considers the Buy zone. Have to be patient. Hard to call the bottom, difficult to time the market. Macro picture is still murky. If you're not in a hurry, you can sit back and wait for some of these prices to come to you, which they still might.

Cash weighting. Higher than normal. He looks at broad asset allocation, not just equities. For the first time in many years, cash is a reasonable alternative. GICs are paying reasonable rates, and fixed income is looking quite attractive. You can find some high-quality, low-risk bonds that are paying north of 10%. Periods of stress create interesting opportunities. He's looking to lock in some income over the next little while while volatility remains high, which should result in both income and some capital gains.

Canadian banks. Never likes to tell clients to sell their banks. But if you're sitting on cash, waiting to deploy, it depends on your time horizon. If your time horizon is greater than 5 years, this is a great time to invest in bank stocks. Yields are very attractive, valuations have checked back. But the Canadian banks are going to have a rocky ride for the next few months. Likely to be more estimate revisions on the negative side, with the rapid tightening of interest rates. We haven't seen the impact yet of higher rates. Going to be some tough months as people renew mortgages. This will potentially increase credit loss provisions, capital markets have been very slow. Tough for banks to generate above average returns. You could hold off for a few quarters to see how things go. But he'd tell a young investor with a long timeline to start throwing some money at the market, as it's so difficult to time.

Stocks without dividends. It depends on the strategy. He has an all-cap portfolio that doesn't require dividend payments. One of the common threads across his 3 strategies is to own companies with good balance sheets that generate lots of free cashflow. If a company doesn't pay a dividend, there's going to be more volatility with the stock that you have to pay attention to.

Stock buybacks. Tax-efficient way to give money back to shareholders. He'd prefer that companies deploy capital on acquisitions or internally to generate a higher ROE, but it's a reasonable way to provide capital to shareholders.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Historical Changes in the US Dollar and What to Expect Going Forward. The US dollar index has been screaming higher this year amid rising interest rates and global economic uncertainty. Although, this is not the first instance that the DXY has risen ~20% in any given year, and in fact, previous instances that have seen this type of increase have been associated with major global economic events. Clearly, when the dollar is rising, traditional asset classes are going to witness headwinds and strain. This strain on traditional assets is quite evident with the S&P 500 down (~25%) and the US dollar up ~20% this year.

You need a strong stomach in this market--stocks, bonds and real estate have been falling in unison, not since 2008. Central banks were misguided in thinking that people would come off the sidelines and return to work, but many are not coming back. Hence, the banks are creating demand destruction through rate hikes. He's staying defensive.

Believes US Federal Reserve will slow the rise in interest rates now that the USA 10 year bond yield has reached 4%. USA 10 year bond yield of 4% provides stability to market. Energy prices will also weigh on US Federal Reserve decision to raise/decrease interest rates going forward.