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

News from Europe keeps getting worse. Fair observation. If one major trading block falls into the economic abyss, very likely the rest of the world will follow. Lots of smugness in NA with what's happening in Europe. High USD and CAD is highly correlated with headwinds for foreign unions as well as high unemployment and recession. We all live in glass houses, so a bit of sanity is needed to see the full picture.

Cost of energy to industry. In the whole Eurozone, you had some very strong economies like Germany and France. If you add cheap currency and cheap energy, you got a perfect storm for opportunities for growth. But that's unwinding now, quite rapidly.

Britain and tax cuts. We may not be too far away from a crisis of confidence in the new British PM. People ultimately vote with their wallets. A lot of carnage. Devastation in currency, spike in unemployment. Things aren't going to get better anytime soon. If we saw a bottom, could put capital to work, but not anytime soon.

Global shipping. 2020-21 was solid, as freight rates were high. Since Covid, logistics backlog unwinding. New supply coming on will depress prices. Decoupling of US shipping operations from other parts of the world, which will be a negative. He plays the space through Maersk, which he sold on valuation. Wait till these stocks come down. Don't touch here, the macro is not great. Even shipping that supports oil and oil storage might be just a trade.

Semiconductors. You want to buy analog chips that favour low-grade, industrial applications. The massive flow of funds into semis is now unwinding significantly. Primary trade on semis is a long-term short. A buy could be 18 months away at least. His preferred stock is ADI.

European banks. Take a hard look at the Ukraine conflict and decide whether it will be localized, so that after the recession, the rest of Europe will get back to business. If so, as the currency falls, could be an opportunity to buy at record low levels and hold as they recover. If you're not looking through that lens, you probably shouldn't be there. He's not adding any more banks right now until he sees the status of non-performing loans after the recession.

Canadian vs. US banks. In Canada, the large banks own a mortgage asset, and they underwrite, administer, and collect on it. So you have a large iceberg underlying the profit cycle of Canadian banks. Quite resilient. For US banks, mortgages originate at the community banks and then move up the channel and can be sold. Income from these is largely transactional. If transactions slow, as in a rising interest rate environment, this would be a revenue headwind, and you'll see a spike in non-performing loans. US banks will trade down, probably more than Canadian ones. But when we bottom out, there will be a significant opportunity. Wouldn't touch a US bank now. Not a huge fan of banks right now, but if he had to choose, he'd buy a Canadian one.

Sectors for a recession. Historically, commodities such as metals or energy are the #1 performers during a recession. The other categories are consumer staples and pharma. Gives an opportunity to participate in inflation.

Believes economic activity is the largest factor impacting real estate (not interest rates). Defensive asset classes are the best spot for investors in uncertain times. Supply/demand big influence on real estate performance (certain areas of real estate perform well in down times). REIT's behave like stocks in the short term (volatile), but long term will perform well. Fundamentals are still strong in certain areas of real estate (industrial & single family rental homes).

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Limitations of Analyst Forecasts. When looking at how a company performs, oftentimes the first steps include looking at how company performance versus analyst expectations. More often than not, share price performance following the release of the results depends on how a company has performed relative to estimates. While analyst estimates can come from very detailed and thorough analysis, these are still estimates. Estimates change as new developments come in, fundamentals change, or the macroeconomic environment shifts. Analyst expectations can be a good reflection of what is expected of the company and what is being priced at the current valuation. Given the significance, there are limitations and challenges in forecasting that investors must consider.

Based on data by technical analyst Ralph Vince Stocks are hated and the market won't bottom until there's no one left to sell. Data since 1980: the percentages of bulls was 18% last month, among the lowest in history. Anything under 20% means holds your nose and buy. Last month, 60.9% of investors were bears, the last seen since the crash in 2009. When it's this extreme, it's a buying opportunity--as painful as it is. The University of Michigan consumer confidence index last month hit an all-time low. VVIX (volatility) is near Dec. 2018 levels--the last time Powell hiked rates so aggressively; both indicate a bounce is coming. A chart of net-free credit balances vs. S&P shows is at extreme highs. All this data points to: BUY.

We started 2022 with inflation fears. Inflation hasn't moderated the way we like. Now, the Fed is raising interest rates at a record rate and will continue. We need inflation to come down. September's performance has added to a difficult year. However, corrections and bear markets happen and are normal. Into 2023, we could see an improvement, rising stocks and some normalization.

Indicators point to an end to this bear market coming, that it will burn itself out. Until then, there remains more downside. He predicts the S&P to fall to 3,400. Of the sectors to buy, healthcare isn't immune to a market sell-off but will outperform.

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