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

Risks to price of oil. A resolution in the Russia-Ukraine conflict would see a short-term fall in oil prices and energy stocks. Longer term, there's an imbalance between demand and supply. Oil prices should go higher or remain very firm. Recession would cause demand to fall off. But recession is not his base case. Energy is not a crowded trade at this stage.

Anticipated market reaction to Fed rate decision? Fait accompli that we're going to get a 50 bps hike. Probably a case of investors selling on the rumour, and perhaps there will be a bit of a relief rally on the news of the actual hike, especially if Powell dials back on the hawkishness we've heard to date. There will be a lot of eyeballs on this one, for sure.

A return to the days when Canadian markets outperformed US? The good ol' days are back. From 1999 to 2010, Canada outperformed the US in 10/12 years. Then the reverse from 2011 to the present, where Canada lagged the US in 10/11 years. Things are off to a relatively good start for Canadian stocks YTD, with the TSX Composite outperforming the S&P 500 by around 800 basis points in the first quarter, which is the widest outperformance in a long time. Sustained trend, because of rising interest rates and higher value vs. growth orientation in Canada. As well, commodity boom in resource companies in the energy and materials sector benefits Canadian stocks over US. These 2 sectors have just eclipsed the financial sectors for the first time in quite some time.

Portfolio construction now. Canada has the home ice advantage right now. He's been shifting meaningful portfolio weightings from the US to Canada. From longer duration, secular growth stocks into value, cyclical, resource trades. All the while being mindful of the risk of the economic cycle being truncated by the expected rate hikes.

Gold. Agrees that gold is going higher. He has good gold exposure across his 3 portfolios from momentum to growth to dividend growth. He owns a royalty play and a big miner. See his Top Picks. If you believe gold is going higher, do you want the high torque name, or the big diversified large cap? The answer depends on your conviction in the direction of gold. Gold's behaviour is enigmatic. Trend is favourable for long positions.

Today, Jay Powell sid he wouldn't hike rates by 75 basis points, and shares soared. Until that moment, stocks could have swung either way. By tomorrow morning, the market will return to worrying, though. Sellers fear Russian is out of control, that China may invade Taiwan, that the hikes will lead to a crash landing. But he is confident that Russia will back down as the West keeps arming Ukraine, that Powell is intelligent and a smart Fed Chief, and he would not sell this market. He'd own oil, defence and cybersecurity, food, drugs, banks and even some tech, like AMD and Nvidia.

It's widely expected to be a 50-point move tomorrow as well as June, but what he will listen for is their commentary and tone--hawkish or dovish? The bond market is the driver here. The 10-year yield touched 3% yesterday and anticipating the Fed's action while the market rerates what it expects will happen. The market is now at an extremely negative point, as pessimistic as 2008 or even further back, based on data he's seen. There are challenges and the market won't turn on a dime, but investors must remove their emotions and accept that cyclicality is a part of markets. It's a difficult but important time.

We're four months into a bear market. US Fed increases are widely expected, so let them happen. Inflation is approaching a peak and the rate of inflation will decrease. Companies that are still growing at the FAANG stocks, not slowing down, generating a lot of free cash and buying back stock. Also, consumer stocks with strong brands, like Pepsi and Frito-Lay, have pricing power. Witness the Loblaw-Frito Lay war earlier this year. He's watching these sectors.

Educational Segment. Looking at some indicators, it looks like stocks are oversold. Looking at seasonality for the second year of a presidential cycle, you see a period of a cautionary area. May tends to perform the worst. We are probably oversold that there will be a bounce after. Area of opportunity right now. Tradable.

It's been the worse start of the year for the NASDAQ. S&P500 and bonds are also having a bad start. Typical portfolios are not doing well this year. We will probably get a bit of a trading rally.

We will probably get 50 basis point increase this week. They want the overnight rate to 2-2.5% as fast as they can. Then they will pause and re-assess. First quarter GDP results were negative. Although consumption was fine, the Feds will still look at it to decide how much to tighten.

Inflation. Things should moderate eventually. Some of the big accelerators such as rents and car prices should slow. Wage pressure will be sticky. We could see base rate of inflation stick in the 3-4% range. It will be different and more difficult on a policy basis to stimulate.

There is 1.7 trillion in repos. There is money out there to suck up the bonds that are being sold into the market. Over the last month, tax receipts have come in much higher than expected. Funding needs for treasuries will be less than expected.

Job market. Still a decent jobs report. Saw a downtick in labour demand. It is still expanding but right on the line. The Fed may be tightening aggressively could mean a recession.