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

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.

The upcoming US Fed announcement on interest rates A 75-point hike will restore a little confidence in the US Fed. Now, there is no confidence as the market is down over 20%. That's a decimation of sentiment. We need to see other prices, including oil and housing prices, to come down. We need to see the effect of the hike on commodities and food over the next few months before we restore our faith in the Fed.

Interest rates will go up, perhaps by 75 points. Positive is that employment is strong in the US and Canada. The indices are trading at historic averages after entering a bear market (in the US). She's looking for earnings revisions going down. The US consumer is still spending--so far so good. During Covid, consumers accumulated savings. Now, we're seeing people travel, which is positive. This could allow the US Fed engineer a soft landing.

Today's sell-off indicates a loss of faith in the Fed who wrongly called inflation "transitory." Would the market view a 75-basis point hike by the US Fed on Wednesday as panic? No. In fact, the market would be relieved, welcoming it to fight inflation.

Let's just have a string of bad days (or weeks), flush it out, get it over with and call it a bottom. In some ways, she welcomes today's harsh sell-off though today (and last Friday) were terrible sessions for markets. There's still further down to go. What is the right market multiple to bounce off?

Bitcoin is crashing Some investors are losing a lot of money, confident that cryptos were immune to inflation--that is not true. Also, there isn't a long history of cryptos to reflect on.

Semis still face a lot of headwinds. The semis signal cyclicality in the market; they are guilty by association in the market. She prefers cloud software.

Cash as a top pick Would sit on the sidelines leading up to Wednesday's Fed meeting. The second half of the year could be better than the first, but later in the year.

Last Thursday was pivotal and the sell-off since then amounts to a profound lack of confidence in the US Fed who are behind the curve. Even a 100-basis point hike (the Fed meets tomorrow and Wednesday) won't do anything. Markets have no confidence as liquidity is being removed. Crypto excesses are being removed and real estate is next. Let this malaise unwind. Time is the only solution.