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

Educational Segment. Historically 200,000 - 300,000 people get laid off every week. 400,000 - 500,000 layoffs per week would suggest recession. Nothing indicating this is the case yet. Large amount of room for layoffs in the economy.

Recession fears fully baked in? We've seen a multiple contraction from 24x to 16x, but we haven't seen earnings come down a lot. This week will be very powerful for US earnings, especially big tech and industrials. Earnings are backward looking, so people will be looking at forward guidance. If people feel we're in a slowdown, that will affect how they think about earnings for the next couple of quarters. So we could see another leg down, but that's when you want to buy, as a lot of the information will be already in the market. People are comfortable with interest rates going higher, but they don't know where earnings are going. That's what's captivating the market until we get numbers from companies that are big market drivers.

Earnings reports so far. If you look at the consensus number from analysts, things are higher, but a lot of that is just energy. If you take energy out, it's gone down. The banking industry is increasing reserves, which tells you that they're anticipating increased problems with loans. Companies may be having a more difficult time. People are wary of advertising revenues. Travel continues to do well, but it's coming off a very low base, and that's hard to see as sustainable over the next little while. Numbers this week will give better direction on US corporate earnings and guidance, and a broad spectrum of the US economy. Need to see clarity there, and then you can make a decision as to whether the market's making a bottom or not.

Investing now. If there's an earnings contraction and multiple contraction, that's when you want to buy the stock market. In this environment, you can look for great companies that you always wanted to own, because the valuations have gotten cheaper. You get a few opportunities in the stock market, and this is one of those times.

Price forecast for WTI oil 2022 and 2023? He doesn't have one. Hard to get right. Oil is in a unique situation presently and won't be in that same position a year or two from now. As drilling increases, the price will stabilize. It will come down to more reasonable levels as the world normalizes.

Canadian banks right now. At these levels, any Canadian bank will be good for you. He prefers TD and RY. RY has spent time and energy being a good investment bank as well as asset manager. Both have strong Canadian franchises. TD spent time developing a great asset management business in Canada. Both have strong businesses that outperform on an ongoing basis. Buying here, you'll do very well over the next couple of years with either TD or RY.

A quarter of the S&P's earnings come out this week. Also, it's hard to trade before the Fed announces its next rate hike on Wednesday (the last before September). Problem is, Walmart today announced an inventory gut and price cuts. Who else will have too much inventory? Price cuts could balance pernicious high gas prices--good for consumers.

Believes that signs are indicating a slowing inflation number. Interest rate hikes will take time to fully reflect in prices. Hoping that peak inflation is behind consumers. Falling commodity prices are main indicator of slowing inflation.

Not seeing any signs of consumer spending slowing down. Watching bank earnings for signs of slowing spending. Strength of US dollar is negatively affecting companies earnings. Mixed earnings for Q2, but is pleased with reaction from the market. Believes still a lot of negative sentiment priced into the markets.

Next week's big tech earnings are overwhelming. Get sleep. He remains bullish long-term, but is nervous now. Earnings of the past two weeks have been pretty good, though there are worries. There isn't enough data yet (only 15% of the S&P stocks have reported). Wants to see what Apple and Qualcomm have to say next week.

A bear bounce or bottom? Sentiment data hasn't jived with real data from the economy. Reports are giving guidance and clarity that the markets need. She sees an inflection point to the positive though.

He's buying 6-month treasuries with his cash to be cautious. You get a nice yield in a short run.

Markets. First half of the year was choppy for both bonds and stocks, both in Canada and US. He's positioning defensively. Markets have come off their peaks, and he expects a recession to start later this year and continue into next. Taking less risk in portfolios than a year ago. Emphasizing companies with strong balance sheets, self-funding, selling products that meet consumer needs instead of wants. Going for opportunities in staples, utilities, telcos, healthcare. Leaving the more cyclical areas like financials, tech, consumer discretionary, and industrials.

Overweight cash and gold? Yes. Cash has fared better than bonds this year. Steep rise in interest rates is the cause of the bear market that's unfolding and hurting bonds. Cash is a reasonable place to be. Gold has been disappointing, but still thinks the trend is intact. Higher highs are still in store. Relentless buying of the USD and other traditional, risk-off, safe haven assets has put pressure on gold. Essentially, those assets are competing for capital, and the USD is winning at the moment.

Canadian banks. A cornerstone of portfolios. Cater to needs, not wants. Indispensable to the economy and a leveraged play on its growth. Dominant oligopolies. Could be vulnerable to profit losses this year. Net interest margins are compressing. Dividends are safe, likely to grow. Well capitalized. Usually market outperformers.