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

Stocks rallied today as the Fed hiked 75 basis points. Why? "Data centric." Jay Powell said he sees robust job gains but softening spending and production. Data. Jay is now ahead, not behind the curve. Will there even be another hike? Warning: previously, markets often drop the day after the Fed announcement.

We've been through world wars and depression. Further, after these downturns, markets rally strongly. This is the time to buy. He looks for companies with a record of free cash flow generation and earnings.

Investment-grade corporate bonds vs. a bond ETF For the corporate bonds, a retail investor wouldn't be buying them at the same price an investment firm. If you get a reasonable yield, go ahead. Owning an ETF gives you diversification though; an ETF avoids the risk of holding an individual bond, should anything happen to that bond and its value falls. He prefers a bond ETF.

Why are markets down before a Fed meeting when it's commonly known when the US Fed's hikes are baked into the market? There's a lot of day-trading around Fed meetings. Also, it depends on what the Fed's wording will be, since that can have huge impact. Yes, it's baked into the market, too. This volatility is nothing we haven't seen in past cycles.

Perpetual preferred shares The problem is if inflation remains this high and rates rise, it's like buying a 100-year bond--prices will go down and there's no maturity date. However, non-preferreds will enjoy higher dividends. The risk-reward is not good with preferreds.

Believes there is an outside chance of a 100 basis point interest rate increase this week. Doesn't think that the US Federal Reserve wants to increase rates too much. Expecting a 50 or 75 basis point raise.

Higher interest rates seem to be cooling market. Not seeing any material down tick in revenues from corporations. Waiting to see if there is any pain on Mainstreet from job losses.

Thinks that the Bank of Canada will match any interest rate increases from US Federal Reserve. Expectation is for US Fed rate to be at ~3-3.25% by the end of the year. Market is already pricing interest rate cooling into 2023. Best time to lock in GIC rates will be in the next quarter.

ZCH (ESG China exposure) vs ASCH (mainland China business) commentary. Would prefer ASCH on the long term. Ok with either investment. Take both for balanced portfolio.

Educational Segment. 106 out of 500+ companies have reported for Q2. Foretasted earnings are mixed. 60% of companies are beating expectations.

Educational Segment. Energy earnings creating most of positive gains (up over 244% this year). Covid-19 pandemic aid reducing economic support in the economy. S & P 500 down even though earnings are rising. Expecting job losses as S & P 500 has fallen.

Educational Segment. Historically 200,000 - 300,000 people get laid off every week. 400,000 - 500,000 layoffs per week would suggest recession. Nothing indicating this is the case yet. Large amount of room for layoffs in the economy.

Recession fears fully baked in? We've seen a multiple contraction from 24x to 16x, but we haven't seen earnings come down a lot. This week will be very powerful for US earnings, especially big tech and industrials. Earnings are backward looking, so people will be looking at forward guidance. If people feel we're in a slowdown, that will affect how they think about earnings for the next couple of quarters. So we could see another leg down, but that's when you want to buy, as a lot of the information will be already in the market. People are comfortable with interest rates going higher, but they don't know where earnings are going. That's what's captivating the market until we get numbers from companies that are big market drivers.

Earnings reports so far. If you look at the consensus number from analysts, things are higher, but a lot of that is just energy. If you take energy out, it's gone down. The banking industry is increasing reserves, which tells you that they're anticipating increased problems with loans. Companies may be having a more difficult time. People are wary of advertising revenues. Travel continues to do well, but it's coming off a very low base, and that's hard to see as sustainable over the next little while. Numbers this week will give better direction on US corporate earnings and guidance, and a broad spectrum of the US economy. Need to see clarity there, and then you can make a decision as to whether the market's making a bottom or not.

Investing now. If there's an earnings contraction and multiple contraction, that's when you want to buy the stock market. In this environment, you can look for great companies that you always wanted to own, because the valuations have gotten cheaper. You get a few opportunities in the stock market, and this is one of those times.