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

REITs in this environment. Doesn't like office or retail. Likes apartments and industrial. Played this theme through the pandemic, and though that idea's a bit tired, it still has legs. As markets get more uneasy, you want to grab the most defensive assets you can. Apartments and industrial are defensive, but have the dynamics of expansion, so there are tailwinds.

Markets. Inflation is the primary factor affecting markets today and its effect on interest rates. We're entering a volatile period, which could last a while. We started with a supply shortage, which led to inflation, and the central banks are trying to stifle demand by raising interest rates. The real question is whether we'll go into recession, and he thinks we will, and the further question is how deep and how long. Problems affecting markets will take some time to work out, such as the war in Ukraine, de-globalization, and security of supply. It will be an interesting time, and value will become much more important. The emphasis is going to be on real, near-term, high-quality earnings and good balance sheets.

Can stocks rise along with interest rates? He supposes they can for companies that can pass through costs, such as grocery stores. But no matter the company, they're being hit with costs on the supply side. Can they raise prices as fast as costs are rising? "Effective cost control" is a buzzword for management these days, and often there's not a lot they can do. Also pressure on wages as the cost of living rises. It's going to take some time to work out. Governments have not talked yet about wage and price controls. He's hoping we can get to a more normalized interest rate period. Since the financial crisis, we've been living in an imaginary world when it it comes to interest rates. Those days are likely gone.

Telcos. There's growth in telecom going forward, though it involves a lot of capex. In the long run, they charge customers what will generate a profit. Media side might be a bit more volatile. He likes BCE and Telus, not so much RCI.B or SJR.B.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. In today’s financial market, it feels as though there are too many economic headwinds to keep track of, and investors and non-investors are all well aware of the pending and actual economic woes. We believe that the business cycle is currently contracting and so are forward earnings. Going forward we expect to see continued weak PMI (Purchasing Managers’ Index) readings, thereby driving the PMI moving average lower.

Jay Powell said today that he and the Fed will do anything to get inflation down. Stocks fell on his words, which sound harsh, yes, but will be soothing later. Over the long haul, persistently high inflation punishes stocks, worse than the pain now. There are too many jobs and too many savings out there. It's a brutal way to beat inflation, yes, but necessary. We'll see downward revisions in earnings.

Show unavailable for technical reasons (19-09-22).

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. A Disconnect between the Markets and the Economy. As most of us have heard before, the financial markets are forward-looking. One of the biggest hurdles for investors is trying to understand when periods of disconnect between the markets and the underlying economy occur. Take 2020 for instance, the financial markets declined roughly 30%, and yet we were just at the precipice of the economy locking down for an indefinite number of months, which would lead to massive losses in corporate profits. When the markets rebounded in the following months, many investors were left scratching their heads as to how the markets could be increasing in the face of a worsening economy. The biggest takeaway from this period in time was that the markets were forward-looking and pricing in the impacts of QE, fiscal stimulus, interest rate declines, and the ingenuity of consumers to shift their spending to online.

There are signs that inflation may be leveling off and that there's a peaking of interest rates. Every region in every country should be looked at differently. Smaller and developing nations have debt problems but larger countries not as much. Their markets are more diversified. The U.S dollar is seen as a faculty for emerging markets. Some companies are doing well because of the strong U.S. dollar.

Question was on an ETF recommendation for Europe. Europe has several months of winter ahead and a probable shortage of oil and gas. Also several countries have economic difficulties such as debt so now is not a good time to invest in Europe.

The question was on the Mexican Stock Exchange - is it likely to be more like other North American exchanges or Latin American exchanges which have more volatility. The Mexican economy has been growing quickly but there is a concern that there is not much growth left. Oil exports are in a perennial decline and there are structural issues such as no water in the northern part for industry. Also it can't compete with areas like China. She owns one company in Mexico so buyer beware.

The question was on the effect of the severe lockdowns in China which has a zero Covid policy. This has affected growth and the GDP forecast of 5.6% is in question. There are stoppages in factories, etc. However the re-opening of the manufacturing processes in various industries starts up again quickly. Inflation has not been much of an issue but may return quickly. She also mentioned that the Chinese Covid vaccine does not work very well. Overall China continues to grow in services, consumption and technology and there are strong pockets of opportunity.

The question was on getting involved in the Indian stock market. You can go to a broker, buy ETF's or buy Mutual Funds. Registration takes a long time. India has lots of entrepreneurship and good businesses. You can target many industries including the smaller pharmaceutical companies which have more growth opportunities than the bigger ones elsewhere. Private banks like ICICI will do better than government owned banks. They have to tackle inflation which is a problem because of infrastructure. She has a positive outlook.