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

Market strategy. Nice relief rally of the S&P 500, up about 9% from the mid-June lows. He gets asked every day if we've hit a bottom. Difficult to ascertain the bottom during a bear market or correction. Possible we've already marked the bottom, or we could be closer to the bottom than many expect. This bear market is 7 months old, getting long in the tooth. The last 8 bear markets have ended within 6 months. Seeing a bit of an inflection point on inflation. Gas, commodity, and lumber prices are falling. Housing is already cooling in Canada, expected to cool in the US with fewer starts and lower sales. Central banks are making a tradeoff between growth and inflation. By next year, we'll see a deceleration in the economy, and the central banks will start to lower rates at that point.

ETFs with good dividend and some growth? XEI in Canada. Nice dividends, decent growth. Top holdings include ENB, RY, TRP, BCE, TD, PPL. Yields about 5.2%. In the US, VYM, whose top holdings include JNJ, XOM, JPM, PFE, HD. High quality names, good growth, nice dividend. Yields about 3.3%.

Bond ETFs. He recently shifted into longer duration bonds. Sees interest rates leveling off, and 10-year bond yields may even drop. Preferred shares are in a bit of a downdraft, due to credit quality. In Canada, he likes ZAG, 7 years duration mostly in government bonds with some corporate, all investment grade. In the US, look at BND, same characteristics. Any downdraft in yields means a pickup in the capital.

Small vs. big names in energy. Energy is one of the favourite sectors in his portfolio. He's more comfortable with the bigger names like SU, CNQ, XOM, SHEL, MPC, CVX, COP. It's all about free cashflow. Very strong management and ability to control costs. Smaller names might give you more leverage going forward, but operations of the bigger names make more sense. Energy has been a tremendous performer this year. Pullback probably represents a bit of an opportunity.

Stocks rallied today as the Fed hiked 75 basis points. Why? "Data centric." Jay Powell said he sees robust job gains but softening spending and production. Data. Jay is now ahead, not behind the curve. Will there even be another hike? Warning: previously, markets often drop the day after the Fed announcement.

We've been through world wars and depression. Further, after these downturns, markets rally strongly. This is the time to buy. He looks for companies with a record of free cash flow generation and earnings.

Investment-grade corporate bonds vs. a bond ETF For the corporate bonds, a retail investor wouldn't be buying them at the same price an investment firm. If you get a reasonable yield, go ahead. Owning an ETF gives you diversification though; an ETF avoids the risk of holding an individual bond, should anything happen to that bond and its value falls. He prefers a bond ETF.

Why are markets down before a Fed meeting when it's commonly known when the US Fed's hikes are baked into the market? There's a lot of day-trading around Fed meetings. Also, it depends on what the Fed's wording will be, since that can have huge impact. Yes, it's baked into the market, too. This volatility is nothing we haven't seen in past cycles.

Perpetual preferred shares The problem is if inflation remains this high and rates rise, it's like buying a 100-year bond--prices will go down and there's no maturity date. However, non-preferreds will enjoy higher dividends. The risk-reward is not good with preferreds.

Believes there is an outside chance of a 100 basis point interest rate increase this week. Doesn't think that the US Federal Reserve wants to increase rates too much. Expecting a 50 or 75 basis point raise.

Higher interest rates seem to be cooling market. Not seeing any material down tick in revenues from corporations. Waiting to see if there is any pain on Mainstreet from job losses.

Thinks that the Bank of Canada will match any interest rate increases from US Federal Reserve. Expectation is for US Fed rate to be at ~3-3.25% by the end of the year. Market is already pricing interest rate cooling into 2023. Best time to lock in GIC rates will be in the next quarter.

ZCH (ESG China exposure) vs ASCH (mainland China business) commentary. Would prefer ASCH on the long term. Ok with either investment. Take both for balanced portfolio.

Educational Segment. 106 out of 500+ companies have reported for Q2. Foretasted earnings are mixed. 60% of companies are beating expectations.

Educational Segment. Energy earnings creating most of positive gains (up over 244% this year). Covid-19 pandemic aid reducing economic support in the economy. S & P 500 down even though earnings are rising. Expecting job losses as S & P 500 has fallen.