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

Investors should brace themselves for market volatility as interest rates & inflation rise. Invasion of Ukraine presenting investors with market uncertainty. Inflation @ 10% in USA & 6-7% in Canada, not an unreasonable prediction.

Investors can protect themselves from volatility with good portfolio management (balanced sectors). High risk investors could look towards Europe with recent selloff. Technology companies still overvalued, but opportunities in individual companies. Business models that can raise prices are good protection against inflation (high quality brands etc.).

Market focus amid volatility. Concerned about the level of financial markets. We'll see the effects in food, energy, and parts of the supply chain. These elements will push up inflation, raising interest rates, and affecting essentials in consumer budgets. Something's gotta give, and it will probably be discretionary and tech subscription services. Pension fund rebalancing is also on his radar. Bond prices are down 10-15% YTD, equity markets are up, so this drains liquidity out of the equity markets. His firm is always cautious, so they're set up well for the coming environment.

Where to put money in the near term? Invest in essentials -- things people need, not things they want. Wants in society are always changing, but the needs rarely do. In 2020, we had capital abundance, and the wants took over. Now, it's different and we're having food, energy, and housing inflation. He's invested heavily in energy and energy infrastructure and other businesses that meet people's needs.

Are consumers too stretched to help bolster the economy? That's valid, especially in Canada. US consumer is in better shape. The good news is that wages are rising and the labour market remains strong, but employment is a lagging indicator so how long can this continue? Uptick in demand for durable goods during the pandemic appears to be waning. February US durable goods orders are down 2.2%, the first decrease in 5 months. Durables have a huge multiplier effect throughout the economy. He's concerned and watching closely how the numbers flow through to the economy and how the market digests that.

Investing in ESG. Less than 24 months ago, the oil patch was abandoned in favour of ESG. Now, it's a different story. It's not about what we say, but what we do, and we continue to consume fossil fuels, which are difficult to displace. He's comfortable in the energy and infrastructure space, along with gas and electric, making up the majority of his portfolio. He's also in renewables. Pre-pandemic demand is coming back, plus there's now a huge energy security issue with Russia. He's positive on the whole energy value chain.

Portfolio construction -- put strong dividend payers in TFSA? Broadly speaking, TFSAs often get the riskiest assets with the hope of striking it big and getting a big tax freebie. That's not his approach. He thinks math works out over the long term. If you're under 60, you have lots of time for stocks to compound in your TFSA. He'd rather get 7% for 30 years than 17% for 3 years. So he thinks the dividend heavy-hitters are great investments for a TFSA.

Volatility in oil. Price has been a conundrum. The green revolution is coming, but we need fossil fuels for another 20 years. There's been under-drilling. Price is exacerbated by this horrible war. Canadian oil patch is a cheap as it's ever been at 2-4x. If the price of oil stays here, these companies are still very attractive.

Insulating your portfolio in these markets. He's been tilting toward the value trade for about a year, taking things off the growth area. Hugging dividends, oil, value, and materials. Raised a bit more cash. Fed might be more aggressive, and you want dry powder. Be more opportunistic. When you have oversold conditions in really good assets like tech, go back in for a better entry point or even just for a trade. He did this last week with NASDAQ stocks and SHOP. Names like AMZN and GOOG have been very buyable down here. If we have a flattening yield curve or concerns about global growth, investors might warm up to the growth trade again.

Why did Canadian banks fall out of bed this morning? You can't read too much into a couple hours of trading. They've been a good roll for a long time, so not as cheap as they were. Great earnings. BMO's issuance yesterday had something to do with its drop. Bond yields are down, so the concern is inflation is too high and the Fed will raise faster. Yield curve is nervous. Banks like higher, short-term yields. US banks have really had a hard time the last couple of months.

Banks and benefit of rising interest rates. He owns a lot of banks. At this point, they're getting a bit rich, though there's still room to go. But he doesn't like piling in on the 7th inning. They're a good long-term hold, but a bit too pricey now for a new position.

Cheapest Canadian bank? BMO is the cheapest, then CM. Whole banking sector has a few more innings to go. Great place to be over time.

Q4-2021 saw GDP growth of 7%. Q1-2022 is projected at 1.3%. This means the economy is slowing down and a lot of interest rate moves happened in that time period. So, this sets us up well for the market to continue to rise. He's fully invested, and he was not scared by the slump.