A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Sadly, we have more selling ahead before the market capitulates. Apple has held up the best, down 18.5% this month. Microsoft too, but both names need to feel more pain. Key here is the Fed--they need to keep tightening to tame wild inflation. The Fed isn't concerned about the painful stock movements.
COMMENT
Consumer staples this week have been beaten. It's disappointing that we can't sustain a rally like today, even though earnings recently have been good--except this week where retail earnings were terrible. Consumer demand has been strong, but higher costs are eating into profits. No, she sees no recession this year. Next year, we'll see. Not just the Fed, but supply chains will also fight inflation. Tech and comm. services are 35% of the S&P and are still over-owned. Buy companies that make money, have earnings.
COMMENT
To consider in this market: 1) Will the Fed be more aggressive, like hiking75 basis points? 2) When will the consumer roll over? Doesn't see it yet. 3) Has the market capitulated? No. To do so, what he's looking for is one big blow-out day, like a Bitcoin company going zero, some company that's huge and over-levered. That will be our bottom. Now, we're seeing a slow, painful grind-down. There are great deals out there, like some tech companies trading at once-in-a-lifetime low PEs. We're two-thirds of the way there before we hit bottom.
COMMENT
Believes energy will present opportunity in the services area.
Room to take money off table for energy investors who have made significant gains.
Technology stocks that consistently earn profits are presenting buying opportunity.
Stocks in the tech sector that don't earn profit, will be eliminated from the market.
COMMENT
Will a lot of people be moving into GICs and out of stocks. The market looks forward and investors tend to anticipate rate hikes well before they happen. This is one of the reasons the market is weak currently, as investors fret about higher interest rates down the road and exit. Unlock Premium - Try 5i Free
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Premium contentCOMMENT
Stockchase Research Editor: Michael O'Reilly The recent sell off in some key retailers (WMT and TGT, for example), are casting doubt on the strength of consumer spending -- a key driver in the US economy. Along with the threat of further interest rate increases, these concerns are signaling further market downside may be coming. It has never been more important to use a trailing stop to protect against sizable capital erosion that may take years to recover if a recession or stagflation take hold. We will continue to use the same metrics to identify good investment candidates (cash flow management; comparative valuation; earnings growth prospects; and good management strategy).
COMMENT
Volatility overblown? Realistically, the whole focus is on what's the Fed going to do. Are they going to overreact and plunge the economy into recession? He thinks highly unlikely. Even a hike to 3-5% would be historically low. Nor does he see a recession when there's a large demand for jobs. Some of the large investment houses are seeing modest growth, but not recession. Fed's learned a lot since high interest rates in 1990-91.
COMMENT
Best way to handle the wild ride? Main thing is to have a strategy for dealing with volatility. Most investors have the standard 60% equities to 40% fixed income. Fixed income has been a disaster this year, as the bond market has been clobbered. He took his clients out of fixed income and bond ETFs two years ago and went to cash. Though it's annoying to sit in cash and not make any money, it's better than losing 2.5-5% in bonds or bond ETFs. It's about preparation, not stock-picking or chasing returns.
COMMENT
Global ETF recommendation? If you're looking at a global ETF, remember that 60% of it's going to be US. For an Asian ETF, 52% is going to be Japan. People want diversification. To get decent global exposure, you're going to need to pick up a couple of ETFs, as just one can't do it all. One is XIN, which is mainly France, Germany, UK, and very little Far East. VA Vanguard Asia is primarily Japan, a good place to be, with exposure to other countries in Asia.
COMMENT
Canadian utility ETF for steady income and capital preservation? Definitely look at ZWU. Yield is really high, around 7%. Remember that, for utilities, because prices are regulated by government, they can't respond as well to rate increases, and so they tend to underperform markets. When you put a covered call overlay on them, it reduces the upside a bit, but half of it is not covered.
COMMENT
Geographic allocation. He's always overweight the US market. Greatest breadth and depth, best regulation, strongest market in the world, most innovative technological market in the world. He gets Canadian exposure through Canadian banks, as well as XIC and XIU. He bought XLE, which is US energy. Every time he goes into Europe, he loses money. They have wonderful companies, but crazy labour laws. He tends not to do emerging markets.
COMMENT
Strategy when markets go down. It's about proportionality. When markets go down, you can't stand there like a deer caught in the headlights. Plan in advance what you're going to do and what you're going to buy during volatility. For example, he bought some ZQQ yesterday. He's been waiting around for months to pick his price. For holdings he already has, he's prepared to go in and buy when they hit his target price.
COMMENT
International ETF without Russia or China? If you want a global ETF, look at the S&P 500. There's so much interconnectivity with trade, it's hard to totally avoid countries like China. Enormous amount of trade between the US and China. Easier to avoid Russia, as it has a very shallow export market. Emerging markets tend to be heavily China, though that could change over time. iShares might be a good place to look first, as they tend to have more international offerings than the other ETF providers.
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