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

Last time he was on the show his team was very constructive on Canada. They predicted we were going to get to a phase in the market called the "boring middle" -- where you see expansion of breadth, money flowing into small caps, and money flowing broadly into other areas of the market. We're seeing rotation away from Mag 7 names in the US and into other areas of the market.

This phase should last sometime into 2027. So they're quite constructive on equity markets broadly, and very bullish on Canada.

We're seeing small caps in the US, such as the Russell 2000, break out to new all-time price highs. Dow Jones Industrials and Transports are confirming that at well. 

What's noteworthy is that the NASDAQ, until now, has not broken above its November highs. That's telling us that we're seeing those stocks as a source of funds as portfolio managers are selling some of those names. Compare that with a chart of the TSX, which is breaking out to new highs. The S&P 500 has done the same thing. 

All of this is, broadly, positive. What we could potentially see this year is a pretty decent year for the US of low-double digits. But the second year of the presidential cycle is typically the worst year. Due to uncertainty surrounding the midterms in October/November, there's usually uncertainty in the S&P 500 going into October. Once that uncertainty is gone on what the president can or cannot accomplish, stocks in November/December usually start running. 

The market overall could post a 8-10% return. He wants to highlight that the mega-cap names could be up 5-10%, but because they're such a large proportion of the index, you could see a lot of other names up 15-20% because a lot of $$ is going to other areas of the market. The setup is quite bullish for other areas of the market.

The market cycle model is essentially the business cycle with its 5 different phases. Phases 4 and 5 are the contraction phases, when you typically see the stock market coming under pressure. Phases 1, 2, and 3 are the expansion phases and they typically last a year. 

His team believes that last year was phase 1, so now we're in phase 2. Industrials typically do well in phase 2.

As we get toward the end of this year and into 2027, thinks energy is going to pick up. It's going to be a big theme.

His team loves the Commitment of Traders reports that comes out every Friday from the Chicago Board of Trade -- you can google it up. It tells you the positioning of commercial hedgers (the producers), who typically have the most information. Then you have small traders (lawyers and dentists), and then large traders (institutional hedge funds). 

Right now, commercial hedgers are very long crude oil. They always hedge, but now they're the least hedged. That tells him that the smart money thinks that the price of crude oil is going to go higher over the next 6-9 months.

Likes energy stocks here, many of them have been basing. A lot of the Canadian stocks have already pushed higher.

There are many books written about buying stocks, but very few about selling (even though that's the toughest part). For him, he tries to scale out. That way, if it does reverse then he can add back in. But if it continues to head lower, you already have less of a position in the stock and you can continue to reduce. 

A wise friend told him, "Every stock that's down 80-90%, started off down 10%." So 10% is usually where he likes to start trimming. We may have our own opinions on a stock, but if the market's going lower then it's telling you something. Always best to listen to the market.

Part of holding a balanced portfolio is to trim your winners a bit, allocate the proceeds to other areas of the market to diversify, and let your initial position run. As your position continues to grow, just keep trimming along the way.

At the margin, we're seeing a race for resources. Canada's positioned so well. If we can stay neutral and remain a country of law and order, people will want to invest here. They know there's stability, we have so many natural resources, and it's just such an awesome country.

There's a bigger theme as people move away from fiat currencies and paper assets to hard assets. Central banks in Russia and China are buying gold. If that trend continues, then global money managers are going to start shifting money towards those areas of the markets that have a lot of natural resources. And Canada's going to be one of the top picks. Again, it makes him very bullish on Canada.

He's been talking to their US sales team about biotech and healthcare in general. If they're correct on the broader market call, then biotech should outperform some of the more defensive areas in healthcare into 2027. At least into next year, he likes the more offensive biotech over generic and more defensive healthcare.

If you look at a 5-year chart of the S&P 500, he can explain his bullishness. At the start of 2022, they were warning clients of the 4-year-cycle reset (the contraction phase of the business cycle). Then in 2023, they forecast a 3-4 year cyclical bull market into the second half of 2025/first half of 2026. Then in 2025, we had a contraction of the business cycle all crammed into Feb-April. April 8, 2025 marked a major low, and his team thinks equity markets started a new 4-year cycle that should have upside into the second half of 2027/first half of 2028.

So we're in this bull cycle. Biotech is more risky (risk-on), and so it has tailwinds now. But if we fast forward a year to mid-2027, then he'd be much more cautious because the 4-year-cycle reset (contraction of the business cycle) is looming. At that point, people don't want to hold biotech; they'd rather hold something boring/defensive like PFE.

It may test the range of $80,000-90,000, but will be the shallowest 4-year cycle decline in its history, then it will take off. It is the leading of a new asset class. Note that Bitcoin and gold are not correlated.

He was cautious for much of 2025 based on trajectory of inventory builds. That remains the case. Expects inventories to build for the first half of this year.

However, the world is slowly waking up to the fact that we're in a post-shale world. US has confirmed that shale production has begun its descent, and will forevermore. The world has lost its biggest source of incremental supply. Shale lulled the world into thinking it had this abundant source of low-cost supply. Exploration and that expertise fell off. We're now relying on a handful of countries, Canada included, to be able to grow production. It's setting the world up for a mismatch between supply growth and demand growth. 

Once we get past this inventory-build hysteria, the world will determine what oil price will allow companies to pursue large-scale projects and start exploring/drilling again. That price is not $50, $60, or $70. That's where we're headed. For oil exposure, you want Canadian oil.

Short-term uncertainty. But energy investors need to prepare themselves, and their portfolios, for that reality. Because it's coming soon.

Even the biggest oil bear on the planet said last year that base estimate was for demand to grow up until 2050. OPEC reiterated that, and Eric expects some fresh forecasts in a few weeks' time. 

There's a structural imbalance between supply growth and demand growth going forward. Believes that oil will hit all-time highs in next couple of years.

He's not concerned. The view is that Trump's going to go in and oil companies are going to run back into the country, ignoring that they had their assets expropriated twice in the past. Oil is in the $50s, yet companies are all of a sudden going to commit all this capex. His team has been contacting those in the industry, and there's almost no appetite to go back into that country anytime soon.

There are safety concerns. One estimate is that the pipeline network needs "only" $80B to resurrect it. There's been zero investment in the space. Anything beyond an increase of 200k barrels a day will be measured in 4-9 years.

Venezuela self-reports that it's the #1 holder of oil reserves in the world. Two leaders ago, they decided to include in the numbers a lot of the super-expensive, ultra-heavy, super-low-quality crud. So they vaulted from #8 or #9 to #1. Unquestionably, they have a lot of oil. Canada is roughly #3, which might be understated. The situation reminds him of the selloff in oil on the false narrative of a meaningful increase in supply from "drill, baby, drill" -- both events instigated by Trump.

Remains very bullish on nat gas, February price up 50% in last 2 days (biggest increase in a decade). Cold weather plus freezing rain means that some wells in Texas actually freeze and gas can't flow. Less supply, massively increasing demand. But he has the average price for 2026 at $3.90, and uses $4 as a floor.

He remains bullish on natural gas, but not because of the weather (despite the cold forecast). There's a structural increase in demand largely from LNG. The US will be growing LNG exports over the next 4 years. Canada's exports will also increase. At the same time, massive increase in power demand from hyperscalers and data centres.

So, what do you want to own? His firm's strong preference is for US natural gas exposure. Why the US over Canada? The closer you are to where the demand is growing, the better price you get. At the end of the pipe, Canada has limited incremental egress, and so our gas sells at a discount.

The US names are all trading at a discount to Canadian peers. Each of the Top Pick names is about a 10% weight in his fund.

Tech saw a pullback last November over investor concerns of return on investment by these companies. However, we're in the data centre building phase now--look at the performance of GE Vernova and Vertiv, for example. AI adoption is coming but this year you can earn returns on stocks focused on the build component. Look for bottlenecks in the overall AI complex. For instance, storage; Sandisk and its peers are soaring. Where is the demand/supply mismatch? The adopters of AI, like healthcare will accelerate in the second half of this year.

The largest headwind today is geo-political. Trump is now using tariffs as a threat to those who oppose his takeover of Greenland. This is creating volatility in Europe. However he is aware of the markets and the US economy.The Mexican, Canadian and US trade agreement comes up for review in July. It is vital and many corporations want to see it stay. Mark Carney is encouraging infrastructure spending and opening up trade links with countries other than the US, including China. This should stimulate business activity in Canada.