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

This is a shopper's dream--everything is on sale. Higher interest rates and oil prices means consumers will have less money to spend. Offsetting that partially are people who won't buy a new home and spend in retail instead. Tech has been punished. So has banking. Canadian banks are down at least 15%, but American ones a lot more, even though the banks are in great financial shape (share buybacks and dividend increases). Energy and metals stocks: buy them when prices are low and sell high. 12 months from now, the Russian war will likely be over (to no one's satisfaction) and energy prices will subside partially. Oil prices are probably near their peak.

Buy preferred shares? Many investors don't understand preferreds, because the dividend rate is reset every 5 years or called away by the issuer. When interest rates declined, preferreds trading down sharply. If you buy one, you risk the rate being cut. If we have a recession, rates certainly will. Instead, buy 5-year corporate bonds yielding over 4%, which he recommends for someone like a senior who seeks income, rather than preferreds. Safer.

BC Bonds Bond yields have taken off in the past year. There's not decent value for bond investors. Your capital will be secured with BC Bonds, and you'll get a reasonable yield. Stable income here from bonds in the 1-5-year range.

Seniors seeking bonds Regular investment-grade bonds are the best--some Canadian bonds, provincial ones and quality corporate ones like Royal Bank or Bell Canada lasting 1-5 years. Would generate easily over a 3% yield.

Over the the last few years valuations have been a risk but not now since prices have come off. Depending on price movements over the next while the S&P could have the sharpest sell-off since 1962. Over the last 140 years there have been 20 bear markets and the average length has been 289 days. This would take the S&P from Jan.3/22 to Oct.19/22, the 35th anniversary of Black Monday in 1987 so there could be a bottom in October of this year. Property and casualty Insurance could be a good sector to invest in. Also companies that can appreciate over time and are not too volatile.

Believes rising interest rates causing falling markets. Investors rotating out of past holdings which is creating buying opportunities. Be cautious before selling stocks as market is falling.

Messaging from central banks is that there is too much risk in global financial system (Crypto/housing etc.) Federal Reserve increasing interest rates to cool markets. Will cause difficulty for investors. New environment will force companies to return capital back to shareholders and show profits.

This market is brutal and exhausting. Today was a rollercoaster as usual, starting strong, then got crushed by the dip-sellers who dumped stocks. Crude slid today though it shows that we're making progress against inflation. Today did see a rebound in tech. He doesn't see oil staying down until there's a peace deal in the Russia-Ukraine war. Powell can't win: he must prioritize fighting inflation and not creating jobs. He needs to see oil keep coming down.

Recession shopping list. Time to prepare for a recession is not when one is in full swing. Just like the time to buy insurance is not when your house is already on fire. He set plans in motion earlier this year in anticipation of a slowdown in the economy. It's looking increasingly likely a recession is in the making, and you want to be positioned for the environment 12 months from now. Your portfolio should be more defensive, have more cash, more gold and utilities and staples, light on high beta and financials and industrials and some cyclicals. Do your research on things you want to own for the next up cycle. Bull markets follow bears, as surely as night follows day.

What if you haven't raised cash by now? Sell now, or ride it out? A recessionary bear market lasts, on average, 16 months. S&P 500 is down 1/3 off prior highs. Shortest recessionary bear market was 2 years ago, which started in February and ended in March. You don't want to be making binary decisions of all in or all out. Look at your portfolio, stock by stock, and sector by sector. How resilient is it? Strong balance sheet? A need or a want? This one will be driven by consumers tightening their belts. Groceries, gas are needs. $6 foamy latte could become more of a want when things get a bit darker.

Quick service food industry. Not timely. Brands like WEN, YUM, MCD, and QSR. Shares are all down 20-25% YTD. Avoid.

Impact of recession on oil demand, its price, and related stocks? The elephant in the room with any commodity. If you knew what the price was going to be, you'd know how to play the sector. Recession will throttle back demand. Wild card is what will happen with supply. A lot of supply is not getting online because of the Russia-Ukraine conflict.

Canadian financials. Great businesses, especially the banks. Core holdings, though sometimes you want more or less exposure. In an economic slowdown, as he expects this year, you want to pare back. Weed out the names in your portfolio that aren't resilient through the cycle. He owns RY, TD, BMO, and BAM.A. Each has unique aspects that make for good diversification within the sector. BAM.A is the best in class alternative assets manager in the country. Pullbacks provide an opportune chance to buy, put them away, and collect some income. Strong, sustainable, competitive advantages. Strong compounders over time.

Time to be in income and some growth stocks? All eyes are on the Fed later this afternoon. Fed policy decisions have dominated the headlines. Abrupt u-turn from easing to tightening. The aggressiveness proposed for tightening has shocked the markets. Main motivation is to try to get inflation under control. It's more persistent than the Fed first thought, and the war in Ukraine is exacerbating things. Pockets of the market offer good value, those that are defensive and income-oriented. Growth stocks that have really strong fundamentals in terms of earnings and cashflow. Valuations in both have come down.

Favour profitable big tech with strong record of increasing profits? Absolutely. Money has come out of the most speculative parts of the market. Companies with strong fundamentals and cashflow have a lot of options to create value if we were to have a recession. Product domain will likely remain strong, spin off lots of cash, buy weaker competitors, buy back shares.