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

Sectors with expected good results? Very difficult to say. Price spikes in energy and commodities, so those sectors will benefit from higher revenues. Utilities are more defensive, but they should do well. High growth tech has pulled back, so if they don't meet expectations, they could get hit. US bank reporting is alluding that the environment is uncertain and volatile. JPM increased provisions yesterday, which is a big change. Given the commodity-driven economy, Canadian banks should do relatively better than the US this year.

When to sell? Very difficult if there are huge capital gains behind a position. It's a good position to be in, as it means you've done well. One factor is if you think the future outlook for the shares is not good, take some money off and deal with the tax. You're going to have to pay the taxes at some point. Another factor is if the position has grown to a large percentage of your portfolio.

Canadian banks. Good core holdings for income. She allocates 12-15% of a portfolio to the Canadian banks. All are diversified with lending, high net worth individuals, and capital markets. Steepening yield curve is a positive, so she anticipates net interest margin improvement. Loan growth and increase in credit card applications is still to come. Will continue to increase dividends and grow earnings.

BOC hike today and Fed decision next month. Pretty well telegraphed, so no surprise today, or what's going to happen next month. Consensus was for 50 bps today.

Where and how to invest now? Geopolitical uncertainties muddy the waters for central banks. Markets have been volatile for the last few years. Don't bet on one thing. Be very well diversified, geographically, by sector, and also by investment type with growth, value, and income stocks. That mix will let you sleep at night and stay invested in the market.

Areas to avoid? He's very cautious on some of the high cyclicals, specifically the commodities that have gone parabolic over the last few months. This year has seen a transition from growth to value. So now some of the value names are higher than he's comfortable paying, and some of the growth names have tumbled. There's always an opportunity somewhere in the market. As long as your portfolio is diversified, you can shift your allocation to take advantage of opportunities.

Yield curve's effect on banks. Banks that have more of their income dependent on interest from loans depend more on the yield curve. Canadian banks have a mix -- interest from loans, plus income from wealth management, insurance, and other services. So Canadian banks are less sensitive than US banks, especially regional banks, to the yield curve. With the Fed planning to increase interest rates, banks that are more interest rate sensitive will benefit more from the rising yield curve.

Trading pattern of sells at end of day depresses price, looks suspicious. The pattern can be misleading, as it's usually mutual funds and money that's managed on behalf of the banks. Don't get too caught up in that. Anything nefarious will be sussed out pretty quickly by the data feeds and regulators.

Buy the ADR or directly? ADRs are a great way to access foreign markets without paying unreasonable commissions. Lots of institutional investors own the ADRs as well.

Take profit in commodities? Don't sell outright, but absolutely look to take some profits. Consider selling 1/3 or 1/2. Look at what's happening across many commodities, such as NTR. Except for gold, share prices have gone parabolic. War in Ukraine has jolted the complex of commodities, though there's still a bit of room to run. Long term, the cure for high prices is high prices. But short term, it's a tough one to fix.

Auto sector. Biggest headline impact is the chips. Looking at it from a wider picture, the sector is focused on transitioning to EV. They'll all have to invest massive amounts of capex to gear up for the transition. Business economics are not appealing. Avoid the sector. One name he'd pick is MG, as business economics on the supply side are much stronger and they're in a better position to transition to EVs. MG is a sensible way to have exposure to the sector. The valuations for pure EV companies are stratospheric.

Banks. Share price volatility is not specific to the banks. Markets have been volatile. Huge amount of excess capital built up during pandemic to buy back shares or increase dividends. Favourable environment for all banks. Share prices are not as attractive as they once were, but still lots of value.

bond outlook He is a bond bull. We're seeing a collapse of economic activity in countries around the world, certainly if we remain stuck in curve, Yield curves inverted auger a recession. Bonds are a good buy now, though it's been a painful trade. Investors will be rewarded 6 months later if they buy now.

bank outlook Most banks have corrected 5-7%, except Royal Bank which is expensive. The correction will continue. Hold onto your bank stocks, but he won't buy more until they fall further. Be patient. If there's a recession in Q3, banks won't do well. The inverted yield curve will hurt banks, though American banks have fared worse than Canadian ones lately.