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

Cybersecurity. Cyber hacking is an ongoing threat. Clearly, it's a growing market. Still, the interest rate environment will be toxic for tech. Pay attention to the space, but be leery on the pricing right now. Come back in a year and revisit the space.

Has inflation peaked? The price of natural gas, oil, wheat, corn and other commodities is spiking. Nat gas is approaching $8. So, inflation isn't finished.

Has inflation peaked? Yes, but inflation could sustain at high levels of 4-6%. In this environment, valuations contract to 15x; if the market trades higher, then 10-15x. Don't fight the Fed on the way up or now. Valuations are contraction and that's painful and unbalanced. A good earnings report of nice data point will offer brief relief. Stocks above 19x PE will contract and will weigh on the market for some time. 75% of companies so far that have reported have beat. Earnings and a strong consumer will save the day. This doesn't mean it will lead to an explosive rally, but the market won't fall as much otherwise.

Has inflation peaked? Maybe a little. Look at natural gas which is pushing $8 and crude oil has risen. If inflation has peaked, it doesn't rule out that it won't sustain. The market is nervous, as reflected in the Nasdaq.

Has inflation peaked? If it has peaked, interest rates still need to rise meaningfully. The Fed will keep tightening regardless. Another worry is Putin--suppose he uses chemical weapons or tactical nuclear weapons. Earnings will come under pressure, so what will happen them? We didn't see a peak inflation rally recently, but a bear market rally. As for a strong consumer, the consumer isn't that strong. Rather, they're fighting to stay alive in this 70% consumer-spending-driven economy.

Markets and supply chains. Hard to tell right now, visibility is quite low. We'll be able to tell more with earnings season. A lot of companies were anticipating supply chain issues alleviating later this year. Does it get better? Corporate profits will be very important to drive this market higher. Corporate profits are forecast to grow this year and next, and margins are expected to be maintained. Analysts expect companies to pass through higher costs.

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.