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A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. There are five main sectors that we noticed consistently outperform – tech, materials, consumer cyclical, financials, and communications. These are the more interest-rate sensitive sectors and are often dependent on a strong consumer, and so they perform well in years where interest rates are flat or falling, and economic growth is strong. Unlock Premium - Try 5i Free
COMMENT
The weakening U.S. dollar is a function of competitive currencies. Europe is starting to raise rates now. The cooling of the U.S. dollar is a key ingredient in the ending of the bear market in equities but there are others as well. The lower dollar also is better for earnings of big corporations and strengthening growth stocks. We are in a confusing situation because interest rates are rising at the same time as slowing growth and lower earnings, but we could still be many months away from a mild recession because the unemployment rate is so low. He sees rolling recessions and the U.S. in the later innings of raising rates.
Stock pickers should should know their companies well and in particular look for ones raising guidance in this environment. Looking ahead there is a better outlook for Health Care especially in the med-tech area. Also maybe financials and alternate energy.
COMMENT
Back from vacation and he's having trouble understanding this market. Don't give up the ship. There are some good things happening. But the bears say inflation is running rampant, expecting the Fed to raise rates to 4-5%. Hopes Jay Powell hikes rates by 75 points this fall, then 50 points this fall. Meanwhile, Ukraine is winning the war against Russia, and if they win it will be huge for the stock market--collapsing energy and food prices. The lows have already been put in, and Apple soared $6 today.
COMMENT
Doesn't feel that markets will fall 20% even lower than the mid-June trough, as an analyst warned yesterday. Doesn't see a catalyst for that. But we will bump along at current levels into mid-October. It isn't just the Fed. We're seeing improvement in the jobs participation rate. Also, we need to see a serious re-rating in 2023 valuations for such a plunge.
COMMENT
He targets 4,200 on the S&P on this technical bounce. Not sure if it will break through that because of hot inflation, natural gas soaring and sanctions over the Russian war are biting Europeans. China could open back as those consumer spend after lockdowns, which is what happened here, but maybe not. So, earnings could be revised lower.
COMMENT
Believes market is moving entirely on sentiment right now (emotions and feelings).
July rally has faded and market is over selling (feels like a roller coaster).
US Federal Reserve comments in Jackson Hole created negative sentiment.
Investors should invest as if market is normal (accurate pricing of companies).
Extreme markets as of late are a function of emotions.
COMMENT
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Top Sector Performances in a Bull and Bear Market. Consumer defensive has outperformed four times out of a total six bear markets in the past 14 years. Phrased another way, in each bear market over the past 14 years, consumer defensive stocks have a high likelihood of being a top performer. We can see that healthcare and utilities have the strongest relationship with being a top performer in a bear market, and tech, consumer cyclical, and financials have a strong relationship with outperforming in a bull cycle. Unlock Premium - Try 5i Free
COMMENT
Markets losing ground from the summer rally? Equity markets have stalled mainly in response to a much more hawkish tone from the US Fed Reserve. We've given up almost half the gains from the June lows. YTD, energy has been the star, up over 40% for the S&P 500 and 23% for the TSX. Tech, communication services, and consumer discretionary have been the laggards. Continued choppiness over the very near term. September is usually the toughest month, being a winner only 45% of the time since 1950. Further ahead, seasonality can improve sooner rather than later during a presidential cycle. Usually Q4 of a mid-term election year signals above-average returns. From a seasonality and technical perspective, investors can look to better times ahead.
COMMENT
Favoured sectors right now. Energy, healthcare, and financials. Energy has a major supply/demand imbalance, along with major under-investment over the years. So pricing can remain pretty firm, with demand steady. Healthcare has that combination of growth, defensiveness, and dividend yield. Financials are fairly inexpensive, both insurers and banks, and provide great income through their dividends. They tend to do well at the beginning of a cycle, and he may be a bit early, but he's being paid to wait with those great dividends.
COMMENT
Covered call ETF vs. non-covered when markets rise. In general, when markets are moving higher, a covered call ETF will lag a regular ETF in total return. A covered call ETF performs best when you see markets or the underlying positions being flat or slightly negative. The benefit is for investors who need income, as you get the dividends plus the premiums from the covered call. Some of these strategies are paying upwards of 7-8% yields today. That's great, though it may not be as high a total return as if you owned the underlying security. Covered call ETFs are also very tax efficient, as most of the income is considered dividends or capital gains.
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