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A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Educational Segment. Today, inflation outlook is different than in the past. We see a 25 year trend of the 10-year US interest rates is now below the inflation rate. There will be less globalization, more inflation so there will be less profits. Investors need to get boring. For the next few years, maybe tech isn't the place to be. Look for value stocks.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Fixed assets. If interest rates are being challenged and real yields are negative, then all fixed assets are affected. Private credit could be a good solution for a lot of people, although it is illiquid, it gives good yield.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Russia-Ukraine. This will be a problem for a while. Commodity prices will also rise, not just oil. Supply chains must be re-worked.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Inverted yield curve. Has a direct implication to the business cycle. There is less credit with a flat or inverted yield curve because it is less profitable. Inflation is probably going to be stickier than thought as well.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
60/40 portfolio. The traditional 60/40 portfolio is no longer working. How do you deliver the long term expected returns when interest rates are so low. If inflation is stickier, it complicates the problem further. Central banks do not have the tools to deal with supply side shocks.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
We had two buy signals in the U.S. markets on March 14. TSX looks good with a positive fair market value, 33 1/2% higher than current price. It is also a commodity index and with shortages in commodities that is the place to be. Markets swing back and forth between the U.S. and Canada. Canada has been an under performer for 12 years relative to the U.S. The Nasdaq is 38% overvalued and the S&P about neutral without the FANG stocks. Think of the U.S. as a trading market with opportunities to play rebounds and Canada as an investment market. He likes the commodities sector with broad based metals, food, etc.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. The Canadian dollar is up on the year, influenced by oil and other commodities. Interest rates are also a force affecting the CAD. Canada raised rates before the US. Fiscal situation in Canada is not as good as the US. In the next six months, Canada could see some relative strength as international commodities see supply issues. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
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Premium contentCOMMENT
- Wayfair (W-N)
- Walt Disney Co (DIS-N)
- Qualcomm (QCOM-Q)
- Amerisource Bergen Corp (ABC-N)
- CSX Corp (CSX-Q)
- Zim Integrated Shipping Services (ZIM-N)
- Apple (AAPL-Q)
- Meta Platforms Inc (FB-Q)
- Invesco QQQ Trust, Series 1 (QQQ-Q)
- Microsoft Corporation (MSFT-Q)
- Tesla Motors Inc (TSLA-Q)
- Nvidia Corp (NVDA-Q)
- Palantir Technologies (PLTR-N)
- AMC Entertainment Holdings Inc (AMC-N)
- Gamestop Corporation (GME-N)
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Higher rates slow down the economy generally, and often trigger a recession. With inflation limiting consumer spending, it increases the possibility further. Timing is difficult. Markets usually drop before a recession and then rise in the middle. They are also short-lived usually. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
options vs. stocks Options give you great opportunities like big-cap tech like Apple and Microsoft, but be nimble. He's sitting on a high level of cash. He'll jump on options when he spots an opportunity. In fact, he expects them to do well as rising rates often means that tech rises, too (believe it or not). That said, he prefers options in these names, given volatility. All these names have great free cash flow, though their PEs are slightly high (mid-30s for Apple, mid-20s Meta). Definitely buy these on pullbacks, BUT he doesn't see pullbacks coming. Doesn't see them going straight up either. Instead, they will trade in a tight range.
COMMENT
She's optimistic about stocks in the second half of 2022. She expects continuing volatility, and winners and losers. Inflation and supply shortages won't slow as fast as we want. For Q2, companies have digested that the Fed will be aggressive, and the Ukraine war could turn into one of attrition. However, stocks remain better investments than bonds or cash. You must find pockets of stocks to invest in. Fundamentals are key.
COMMENT
Believes TSX will continue to outperform market with large weighting in energy & materials.
Is tilting portfolio towards value sectors such as financials, energy, materials & healthcare.
Doesn't believe a large downturn is in the future for the price of oil.
US oil reserve increase won't affect price too much.
Would advise investors to stay away from the tech & communication sectors.
Thinks further outperform of tech sector is unlikely.
COMMENT
The Ukraine war accelerated trends before the war: the oil shortage, deglobalization and inflation on commodities. This puts more pressure on the Fed which is already behind the curve. The market is way underpricing the war. The Fed must get more aggressive. Both factors make him cautious. Supply chain shortages happened because consumers bulked up on goods during Covid. Post-Covid now, people will shift from buying goods to restaurants and travel--experiences. So, this will lessen pressure on the supply chain and reduce inflation.
COMMENT
US releasing oil from SPR today. Government policy has made a bit of a mess of this energy cycle. On one hand, pushing a green energy approach. But in the short term, we just don't have the supply to let us do that. Structural deficit in energy production is causing high prices. Releasing oil from the SPR is a drop in the bucket, but they're also handing out stimulus cheques for high gasoline prices, which encourages people to buy more gas. Government's doing everything it can to fight inflation, and prices at the pump are target #1.
COMMENT
Stagflation. That's where prices are going higher and growth comes off the boil, but doesn't have to be recessionary. It's a real threat, with some of the highest inflation since 1970s-80s. Certain sectors do well, and others suffer. Stocks that do well are those that are part of the supply chain, are a scarce resource, and have pricing power: energy, commodities, materials, chemicals, base metals. Consumer staples margins get squeezed. You want to barbell high quality, cash flowing cyclicals such as energy and materials. Avoid some of the most expensive stocks and stocks that need expensive inputs for their products.
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