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A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Take profit in commodities? Don't sell outright, but absolutely look to take some profits. Consider selling 1/3 or 1/2. Look at what's happening across many commodities, such as NTR. Except for gold, share prices have gone parabolic. War in Ukraine has jolted the complex of commodities, though there's still a bit of room to run. Long term, the cure for high prices is high prices. But short term, it's a tough one to fix.
COMMENT
Auto sector. Biggest headline impact is the chips. Looking at it from a wider picture, the sector is focused on transitioning to EV. They'll all have to invest massive amounts of capex to gear up for the transition. Business economics are not appealing. Avoid the sector. One name he'd pick is MG, as business economics on the supply side are much stronger and they're in a better position to transition to EVs. MG is a sensible way to have exposure to the sector. The valuations for pure EV companies are stratospheric.
COMMENT
Banks. Share price volatility is not specific to the banks. Markets have been volatile. Huge amount of excess capital built up during pandemic to buy back shares or increase dividends. Favourable environment for all banks. Share prices are not as attractive as they once were, but still lots of value.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Balance is key in markets right now. Having some cash on hand is a good idea in order to take advantage of opportunities. Take a partial position to reduce risk and add when there is positive momentum. This can often carry on for some time and provide good overall returns. Better to hold high-quality companies. Keep position sizing in mind. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
bond outlook He is a bond bull. We're seeing a collapse of economic activity in countries around the world, certainly if we remain stuck in curve, Yield curves inverted auger a recession. Bonds are a good buy now, though it's been a painful trade. Investors will be rewarded 6 months later if they buy now.
COMMENT
bank outlook Most banks have corrected 5-7%, except Royal Bank which is expensive. The correction will continue. Hold onto your bank stocks, but he won't buy more until they fall further. Be patient. If there's a recession in Q3, banks won't do well. The inverted yield curve will hurt banks, though American banks have fared worse than Canadian ones lately.
COMMENT
He's been expecting more volatility since mid March. Thank goodness earnings kick off tomorrow. We will likely trade around current levels until earnings roll in. If the S&P breaches 4,220, we're in a bear market. But he suspects we'll stumble along until late summer or early fall. There's a 97% chance the Fed will hike rates by 50 basis points in May. Inflation numbers were hot. A recession is likely coming, he thinks, in Q3. He sees hints of stagflation coming, which is the worst scenario. Investors must stay on their toes for any market signals. A massive rotation back into utilities is underway in the US and now happening here. Same goes with drug stocks.
COMMENT
Educational Segment. Factor based investing will be key. In the business cycle, there is the slow-down recession part. Looking at 8 different business factors, what you want is profitability and low volatility as a key factor. Low volatility, high dividend companies are what you want.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Banks. Revenues will increase with interest rates, but it depends on the yield curve as well. There are some pressures on net interest margins. Steeper net interest margin curve means that the banks are more profitable. However, much is already priced in. Banks have relatively done well with the shift from growth to value. However, does not think it will outperform.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Gold. Gold stocks remain very cheap relative to the underlying asset. Has been trimming a little here. Hard assets work during sustained inflation. However, long bonds can get attractive relative to gold, depending on how it goes. The inflation is from the supply side. Gold could be a trade.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Looking at what companies have to say about inflation is key. Will these companies be able to pass on higher input costs? We could potentially see some stagflation. If companies are not able to keep their margins, then it will be tough. The quarterly earning that is coming up should be okay, but it will most likely slow down in subsequent quarters.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Banks. Capital markets have been choppy so for a bank that is fully integrated will have some headwinds. Looking at a 60-40 portfolio, it would be the worst quarter so far. Could see a hit on the fee side for banks.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Fear is running the markets and it is tough to call the bottom. You need to have a good timeframe in order to weather the volatility that is expected. Thinks buyers will be rewarded. Investors are seeking safety in a tough market. In the short term, this likely won’t change with the Ukraine war ongoing and inflation remaining high. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Market risks are elevated and economic growth will slow down this year. U.S. GDP forecasts are around 2% for first quarter. Central banks globally will be more aggressive in moderating inflation but they can't control the supply side. 10 year bonds have gone up substantially and are at 2.75% today. We are coming into earnings season so we'll see how companies are dealing with inflation. S&P is 19X earnings so the margin of error is somewhat low. Some of earnings increases is a result of companies passing on inflation costs with higher prices so look for companies with strong pricing power, not ones that are price takers, or with low pricing power.
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