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

inverted yield curve The difference between the 2-year and 10-year bond yields is -30 basis points which is wide and it's getting wider. Yield curves predict recessions which he expects. We should be concerned.

top pick CASH as a top pick. He sees interest rates going up and clouds on the horizon. Play defence, preserve cash. Can own money market funds or GICs, depending on how long you want to be locked in.

The U.S. 10-year yield has fallen from 3.45% to 2.57%. The curve gets more inverted by the day; history indicates a recession, bot how severe will it be? There was weaker data out of China and the ISM today. We need to see more U.S. economic weakness for the Fed to pause--which he doesn't expect nor want.

He read hawkish tones in last week's Fed announcement, not dovish. Even if the next CPI comes down, it's still historically higher. The market will go lower. The effects of the Fed hikes won't be felt for some time, many months.

Last week, the Fed was hawkish and they're nowhere near done--inflation has to fall a lot. The Fed will hike more. Housing has cooled and other sectors will. She isn't buying this rally. There's more pain to come. For some stocks, the bottom is in, but not the overall market.

Not surprised at strong results from Apple & Amazon (free cash flow machines). Tide is going out in economy with rising interest rates. Unprofitable companies will be exposed. Profitable companies can weather economic contraction.

Bullish on energy prices with conflict in Ukraine, under supply in production & increased demand. Recent correction in energy prices unfounded. Concerned that shortage of investment in energy sector is setting up for energy crisis(extremely high prices). Currently has zero capital in Canadian banks (concerned about loan losses with rising interest rates).

It comes down to execution, and depends on the company. Some companies like Apple and Microsoft executed, not Intel. Stay cautious. We still have high inflation. Market expectations were bad going into earnings season. We're still in uncharted waters.

She isn't surprised with strong earnings from oil companies today. Oil will be the bright spot in earnings this year. The supply/demand imbalance will keep inflation high and continue.

July was the best month in a year. The Fed's remarks this week were a soft pivot that the market liked. MSFT, Google and Amazon reported this week and missed topped and bottom lines. Yet, stocks went up. We haven't seen the capitulative flush in markets to bottom, but it has happened in tech, so he prefers tech going forward. He prefers oil stocks. Also, the 10-year yield was moving up, but is now declining. He is cautiously optimistic.

Fed rate hike yesterday. We're back in the soft landing narrative again. The path that was narrowing is getting a little wider. J Powell soothed investors and said there's no reason to hike us into a recession just to do it. They'll be data dependent. The 2-year bond was 3.15 yesterday and went down about 20 bps, which suggests the bond market believes the Fed will do 25 in September, another 25 after that, and perhaps talk about pausing early next year. Lots of people were sitting out the market, even shorting. Yesterday you saw a reversal as those shorts came off.

The bond market. It all comes back to inflation. If inflation is going to be runaway and uncontained, then fixed income will go up or down, as it depends on interest rates. If people think inflation is under control, or the Fed is going too hard, then interest rates will come down and so will bond yields. Long way between now and when we declare victory. This could be a bullish head fake. If he had to choose, he'd say we probably saw the bottom on June 16. But there are so many cross-currents going on, it's really hard to tell.

Keep traditional 60/40 portfolio for next 3-5 years? Yes. Even if this is a false dawn for equities. Even if, worst-case, there is a recession, it will be a shallow recession. There's already been enough erosion in equities, bonds, high yield, and preferred shares. These are already true levels to be building portfolios. If you can get 5-6% on high-yield bonds, and we're not going to have a nasty recession, or if you can get 4-5% in investment grade, it's a good time to start dipping your toe in. He'd be more of a seller than a buyer.

Protection strategies. Protection strategies that most people can really use are asset allocation and diversification. Having an options facility on top of that is just another tool. If he's bearish in the near term, you can sell stocks outright. If you love your stock but feel it has some downside, you can sell a covered call. That's the best way to bring in more income, especially when people are bullish on a name. You can buy puts, but that's like a gun against your head, as it has to happen and you're working against a premium. He likes picking a bottom, by writing a put to get something cheaper. Futures contracts are really for institutions rather than individuals.