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

Macro assumptions for the next year. He reminds himself every day of 2 things: there's the economy and then there's the stock market. The economy is what it is today. The stock market's supposed to be a barometer of 6-9 months into the future. The market's saying it's going to be ugly until next spring and into the summer. But it's not going to get much worse. If we can keep the PPI and CPI anywhere from 0.1-0.4% month over month, then inflation can stay on top of the Fed funds rate. Second half of next year should see a much better economy.

Banks stocks are hitting new lows today She likes how cheap they've become. Banks go down the most heading into a downturn, but they will also rebound the most. They pay a good dividend and offer value. Are good for long-term investors.

Energy is up 43% YTD and 10% for the month, but this is at the start of a secular bull market. The low cost of debt and capital have been drivers. They will prioritize using technology, dividends and shareholder returns.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Own Some High-Growth Stocks. Many investors dipping their toes into a bear market will start with ultra-conservative stocks, such as those in the consumer staples and utilities sectors. That’s one strategy, but investors need to look at growth stocks, and smaller companies (see below), if they want really big returns. It is very true that a stock down 80 per cent may never get back to its previous all-time high, but it can still double, triple or more. Growth stocks are absolute pariahs right now, and stocks that used to be 50x sales are now 3x sales. Many companies are still growing at 50-plus per cent, even in a weakening economic environment. Don’t forget that in a recession, investors will likely pay more for companies that can still grow while everything else retreats. Look for companies growing at 50 per cent today (a Bloomberg screen this week shows 982 North American companies with expected sales growth of 50 per cent or more next year). Even in a recession, many of these will still grow at 20-plus per cent, and that might be very attractive to investors when the economy is contracting.

How are higher anticipated rates by the BoC reflected in long-term GICs? Bond yields used to be so low, so now it's an opportunity if you hold them in the right account. Lock in these higher rates for the next 6-9 months, looking out to 2-3 years.

It’s been a roller coaster for investors so far this year. The U.S. Fed's aggressive policy on interest rates guarantees a recession and increases the odds of a hard landing. However, real-time data shows commodity and home prices are declining and should mean maybe interest rate cuts in the second half of next year. In this volatile market, the valuation risk in markets is much lower. Investors holding cash and low-yield fixed-income risk losing purchasing power over time. Going forward, I think investors should remain well diversified and defensively positioned. Don't exit or sit on on the sidelines.

The market looks irrational to retail investors as it see-saws. Markets are looking at a developing recession, which is increasing volatility. Yet, stocks are oversold. The US Fed will remain aggressive in hiking rates. If we see a wave of downward revisions and guidance this earnings seasons, it could warn central banks that we risk an overshoot in tightening.

Don't take the bait in buying as markets fall. Sure, everybody is negative and news is bad all around. There's a drastic decline in the savings rate, yet people are still buying houses. We don't know when the Fed will stop raising rates, but not soon. They will when wages, homes and food prices go down. Until then, all these rallies are head fakes. Stay the course and hold cash for better times.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Don’t Hold Too Much Cash. The urge to hold cash right now is probably very high. With many stocks down 60 per cent this year, cash looks attractive, even after considering the loss of purchasing power from inflation. But you need to own something other than cash to maximize potential returns in a market recovery. Cash is paying close to five per cent (on some guaranteed investments certificates), but there are stocks that will double or triple when the market shifts to bull mode. Smart investors know to buy when everyone else is selling, and that is certainly the case today.

The Case-Schiller index last week indicated that the housing prices are rolling over and rents will go down. The most important factor is inflation. He doesn't expect a benign print next week. All this requires time--patience. Two months from now will give us clarity. Sit, wait, let events unfold.

The market just wants to get this over with, the interest rate hikes. The market has already priced in these hikes.

Market responding negatively to USA & Canada job numbers. US Federal Reserve not seeing hiring slowdown it wants (means wages will continue to go up). Risk that US Fed is able to cool inflation without recession is growing. Markets are being priced for slow aggregate growth (~3.0% GDP) .

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Thoughts on the US dollar. We anticipate that the strength in the US dollar will eventually come to an end, as macroeconomic concerns subside, and the Federal Reserve nears its terminal interest rate. If the US dollar continues its surge higher, we expect the markets to continue to face headwinds as investors flee to safety in cash or money market funds. Alternatively, if we begin to see weakness in the US dollar relative to foreign currencies as a result of the Federal Reserve signaling it is near pausing rate hikes or the resolution in macroeconomic events, then we expect the markets to gain some support

Short-term pain from rising rates. We're feeling the pain based on having low rates. Inflation built, asset bubbles built, and we're now paying for that. People at home are feeling effects of higher grocery and gas prices. What we're going through now will, hopefully, solve that. We won't see a reversal to 0-2% interest rates, those were an anomaly. Normalized interest rates are mid-single digits, 4-6%. As a society, market, and economy, we'll get used to that. If the economy is operating in an efficient manner, inflation will be lower than that, and we should see that in the next 6-18 months.