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

Today's strong jobs data He's bullish not because of a perceived US Fed pivot, but because he believes in better-than-expected earnings going forward. He expects a soft landing. Inflation is of course the major headwind, but gasoline futures are off 33% from late June's peak and that has yet to show up at the pumps. Also, shipping rates are going down.

Today's hot jobs data The data this week has been very encouraging, like factory orders being better than expected and new orders in the ISM report. Inflation is coming down. However, the economy can handle higher interest rates; unemployment is only 3.5%. The Fed didn't pivot--and has no reason to--last month. She's more worried about 2023, because we don't know the effect of all these rate hikes. For now, though, things look pretty okay.

Investors pricing in an end to the Fed tightening cycle. A bit premature. Nice rally off June lethargic lows, with growth stocks leading the recovery in the NASDAQ. Long bond yields have come down from the May peak, USD rolled over a bit, and gold dipped and then rallied. Cyclical stocks have lagged, which indicates to investors that the Fed is nearing the end of tightening. He hesitates to jump on that bandwagon here. Risk going forward. Fed must get inflation under control. Another 100 bps of tightening to go. Long way to go from 8% back down to 2%. Can't tell if we've seen the peak of inflation, though it seems we have. When Powell soothed nerves a couple of weeks ago, the market may have rallied too much.

Sentiment indicators. He's neutral weight in stocks right now. BAC survey had the lowest confidence on record, high levels of cash. Largest gross short position ever. Lots of money is out of the market expecting a pullback. This gives him comfort that some of the bad news is in. Auto stocks, for example, have already priced in the next recession. We're not going to have a dramatic turndown, but they have to cool down economic growth. Don't rush out of stocks, as they've already taken a hit this year. He still hesitates to say we've hit bottom and we're starting a new bull market.

US vs. Canadian banks. He's not rushing to buy the Canadian banks, he's underweight. There's not a lot of short-term recovery, as tailwinds of the last 2 years are going to disappear. Risk to earnings growth, mainly because slowing economy and capital markets will increase loan loss provisions. Dividends are still safe. He favours BNS and CM in Canada. He's leaning more toward the US banks like C, JPM, and non-bank financials like AXP.

Lifecos vs. banks. Different businesses. Lifecos are better insulated and more defensive in a downturn. Loan losses are less of an issue. Light on financials in general. He's comfortable with the valuation of lifecos.

Pipelines. Likes them. He'd rank them: ENB, TRP, PPL, and then KEY. Dividend yields are all attractive, and he wouldn't worry about any cuts in the current environment. Good valuations. Safe place.

Opportunity in tech stocks with NASDAQ down over 20% this year? Expected pretty robust comeback in the second half of the year. But he didn't expect S&P to be up 4% and NASDAQ up 10% in one month. Got a bit ahead of itself. In the summer, the institutions tend to back away and it's more the technicians out there, so you can have a lot more volatility. Going into the fall, tech stocks will take the market a lot higher, if not close to where we started at the beginning of the year. Seems right now that there are clear signals of economic softening. Earnings for the second quarter have been OK. Yet central banks are tightening and you're starting to see the effects which, hopefully, will pave the way to a softish landing. That could leave central banks to pivot going into next year. He sees a much better place this time next year, or even into the spring. Indexes are barometers of where the economy should be in 6-9 months. He's modestly bullish.

Which segments of tech would rally the most? High growth, not-so-profitable software stocks are going to have to come around. The hardware side should lead the charge, which will drag the software. Difficult when you look at semiconductors, as they're going through cyclicality with a rebalancing of supply/demand. Doesn't think semis will lead the charge.

Gold data from technical analyst Larry Williams and the Gold Continuous Contract Futures (GCCF) chart He believes in holding at least some gold. Hold it as a hedge. But gold is flat for the year and hasn't been acting as a hedge against inflation. Since March, prices have been hammered. An ugly downturn. But don't give up on gold. William's data shows that when small gold speculators get too bullish, then gold prices are near the top. But when they get bearish, gold is bottoming. The latest data says that small specs are net long 92,690 contracts for gold, their smallest long position since May 2019, before gold got a major boost. Last March in gold's most recent peak, those contracts were long 290,000--their largest net long position in 4 years. They are on the wrong side of the trade. Williams says do the exact opposite of those small speculators. In the last 9 years whenever the net long gold position has been this low, the actual metal has rallied. The best selling positions happened when those speculators had large long positions. Gold has been undervalued because the USD has been so. Gold vs. oil: gold responds to the price of oil more than any other inflationary indicator, including the CPI. Now is the time to buy gold, because gold is ready to rally.

It's nuts that when oil prices fell today that tech and retailer stocks surged, like Meta which went up 5.37%. So did Apple, Amazon and Alphabet. Machines at brokerage arms are programmed to buy tech and retail anytime crude oil does down. Crazy!

Inflation is not going anyway anytime soon. The US Fed needs to keep its foot on the gas. We're already in a recession. There is more risk in the market than at any time since Covid hit. Play defence for the next little while. Don't stand pat--do something. trim exposure to equities. Take profits. Shift from 60/40 stocks/bonds to 50/50. We still have rate hikes to come, so things will get worse before they get better.

value ETF He likes value, which outperforms growth historically. Invest in Canada, US or world? Look at Blackrock or Vanguard. Plain-vanilla ETFs that are cheap and broadly diversified are best.

Hedge or non-hedged ETF? It's a personal question. Any hedged security should have large volumes. If you have a long-term horizon, like 20-30 years who will now what will happen to a currency in that span and the hedge costs 5-10 basis points, it isn't expensive, but you could save that in that long span.