Market Commentary — Page 351

Market Commentary

COMMENT

Supply shortages persist? Yes, but we hit peak shortage in Q1. Semiconductor situation is looking better as we move through the year. Commodity prices have fallen back, perhaps as fear of shortages and political risk dial down. In the auto sector, one of his holdings, LNR, reports tonight, and he expects encouraging news on the supply front that will drive new auto production in the back half of the year. All that will help with shortages going forward.

COMMENT

Focus for an income portfolio? High-yielding opportunities, mostly focused on the Canadian market. There are lots of great small- and mid- cap, Canadian companies yielding 5-6%. Some of those are in energy, like ENB or WCP. Even in financials, POW or BNS, their 5+% dividend yields are attractive given the market.

COMMENT

ADR explained. American Depository Receipt. Stocks that trade mainly on a foreign stock exchange, but the company takes some of those equities and lists them on another one, such as NYSE. You get ownership in the share, but it's not the exact same unit at the end of the day.

COMMENT

Oil & gas stocks down - sell or hold? Commodity stocks are volatile, with prices difficult to forecast. They always look their best when the price point is high, but now things are a bit choppier. Oil stocks are still attractive value. Capital spending is much more disciplined, debt's been paid down. He'd stick with them. The economy seems to be a bit more resilient than the pundits predicted. Still good for oil and energy. Worst case would be a big recession, with demand impacted. He doesn't see that scenario. See his Top Picks.

COMMENT

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. The Effects of Inflation. Inflation, by definition, can be described both by as an erosion of the purchasing power of the dollar, or as an increase in the price of goods and services. By investing in the financial markets, individuals can earn a return over the long-term that is above the rate of inflation, and thereby having a low time preference and increasing their wealth after the effects of inflation. We can see that if an individual held one US dollar from 1988 until the present, it would provide that individual with ~$0.40 in purchasing power in today’s terms. Similarly, one Canadian dollar held from 1988 would be worth roughly $0.50 today. Conversely, one US dollar invested in the S&P 500 in 1988 would be worth ~$6.0 (after the effects of inflation) in purchasing power today, and one Canadian dollar invested in the TSX in 1988 would be worth ~$3.0 today. Unlock Premium - Try 5i Free

COMMENT

Today is what peak inflation looks like. Today's CPI number of July was lower than expected and the indices roared by 2%. The rally was across the board from Microsoft to Disney. We're at peak inflation because commodity prices have been collapsing, including oil. Also, supply chains are clearing up. In fact, there will be gluts in products from washing machines to houses. But those gluts will lead to layoffs.

COMMENT

Oil analysis by technical analyst Carley Garner Garner predicts a crude oil bust down the road. OIl prices exploded because of the Russian war. But Russia has been able to sell oil elsewhere, namely China. Now, the U.S. rig count is picking up. Crude in the low-90s is back to historic, pre-Covid levels. $60 would be a floor with low-$90s as resistance. Expect a ton of volatility, but long term oil will be lower. That said, there will be a short-term bear-market bounce by $10-12. Large oil speculators have already unloaded their net-long positions. So, Garner sees a short-term bounce, based on historical patterns. The bounce could happen this fall into October. At $87, oil will bounce--and that has just happened--to up to $102. BUT after this bounce, oil will fall. Use this short-term strength to lighten up on your oil holdings.

COMMENT

The commercial software stocks have gotten too cheap. So many are unprofitable, but private equity is starting to buy them out and take them private, so there is something to these companies. They traded at 8x sales in 2015, 19x in Nov 2021, but now only 7.5x. The long software nightmare be over, but stock with companies that make money.

COMMENT

Three things are happening at once: the lingering pandemic, the Russian war, and inflation. He isn't as worried about inflation as some, that it's not as persistent as some fear. Why? Supply chain snarls and commodity panic saw oil and grain prices go to the moon. The commodity push on inflation is over, but will the U.S. employment raise wages so that it prolongs inflation? The Russian-Ukraine war is a total wild card, how it will effect natural gas this winter. It's tragic and who knows when it will end?

COMMENT

GIC's We have an inverted yield curve now, which means that bond yields in 2-year investments are higher for 10-years and longer. So, you're not being paid for doing on the duration curve. Maybe you go out longer, if you believe interest rates will come down, say in 2023 if there's a recession. If so, you can lock in a 5-year yield at a higher rate than a year from now. But you're not getting paid for the inflation risk. The sweet spot is around 2-3 years. If you invest 10-15% in a longer GIC if you think rates will go down, you likely won't get hurt too badly.

COMMENT

Believes higher interest rates will take time to hit economy, & hasn't filtered into corporate earnings yet. Should have seen more companies with downbeat earnings. Yet to be determined how things play out in the economy. Suspects we are currently in a recession. 1-2 years of sluggish growth in the economy. Investors happy with recent earnings, but will take time to play out.

COMMENT

Doesn't think we are facing stagflation in the economy. Believes interest rates will be at least 2-3% for the next decade. Green energy stocks expected to rise as traditional energy stocks are fully valued.

COMMENT

Educational Segment. Believes we are currently in a bear market. End of a bull market usually has a recession, & every indicator is pointing to a recession now. Difference between now and periods of high inflation in 70's & 80's is high amount of public debt. 0% interest rates have enabled many people to take on large amounts of debt. Rising rates are going to stress both the public and companies. Need stronger economy to come out of recession. Believes US Federal Reserve will focus on stopping inflation with continued rising interest rates. Doesn't believe S&P will rise above 4200. Good time to sell equities and have cash to buy in the next selloff.

COMMENT

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. The Canadian markets have mostly been flat over the past couple of weeks, while the US markets have begun to see an improvement. The stagnating price of oil has put downwards pressure on the Canadian markets which carry a higher weighting towards the energy and commodities markets than the US. The June inflation number for the US was released at a 40-year high of 9.1%, aided by rising gas, food, and rent costs, and the Canadian inflation reading for June came in at an elevated 8.1%, but still lower than the expected 8.4%. The Bank of Canada raised interest rates by 1.0% and the Federal Reserve is expected to make its interest rate decision mid-next week. In this market update, we are going to be talking about the benefits of having a low time preference and the importance of investing to protect one's capital over a long timeframe. Unlock Premium - Try 5i Free

COMMENT

The Inflation Reduction Act won't reduce inflation but rather will inject more money into the system. So, the Fed will likely raise rates higher. Sure, the law reduces global warming and he's totally for saving the planet. However, IRA will hurt some earnings. For instance, Medicare can negotiate lower drug prices which is good for consumers, but not for drug company shareholders.

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

Supply shortages persist?(A Commentary)

Focus for an income portfolio?(A Commentary)

ADR explained.(A Commentary)

Oil & gas stocks down - sell or hold?(A Commentary)

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research.(A Commentary)

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

Oil analysis by technical analyst Carley Garner(A Commentary)

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

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

GIC's(A Commentary)

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

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

Educational Segment. (A Commentary)

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. (A Commentary)

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

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