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

They are positioning for the slowing of economic growth in 2022. Expect dis-inflationary conditions towards back of year. With this in mind have a diversified portfolio for long term needs - with a variety of asset classes. Sectors to consider are consumer staples, some consumer discretionary, utilities, gold, energy and other commodities, some of the interest sensitive banks. Decrease exposure to the giant techs and other long duration growth equities. Investors have less appetite for risk taking. Commodity trades, and low risk stocks are in favour.

The question was on banks.The government has announced a 1 billion dollar tax on bank earnings. Banks will find offsets for the small percentage loss of profits. They will pass at least some of the costs to their landlords and employees, probably not much to shareholders. Insurance companies will probably follow the same route.

What matters is how quickly the market discounts the 50-basis point rise in rates. Doesn't mean the S&P will return to 5,000, but there will be some rotation. Financials and healthcare are trading at a 25% discount to the market and could see earnings growth, which could drive indices.

Tech stocks have been on a tear the last two weeks. He's underweight large-cap tech. They can run further, meaning the FAANG, 7-10% further this year, but not PE expansion. He's less confident the high-PE stocks which will remain challenged--not for long-term investors. He believes more in cyclicals and value stocks where there will be PE expansion. He's all-in in the markets.

The economy appears to be strong in terms of low jobless claims and factories being built. Also, inflation was showing signs of rolling over even before the Russian invasion. WTI at $114, which didn't stop economic expansion a decade ago, might be overcome by supply chain bottlenecks that are starting to ease at ports. Yes, there are clouds, but there are positives, too. The market is now focused on the positive. Today's market rise could be a dead cat bounce, but it doesn't feel that way.

She's a fully invested bear. The S&P is up 16% in the past 12 months. She's been doing lots of covered calls. Energy and agriculture are areas to invest in.

Will the tech rally last? The Nasdaq is up nearly 1,500 points in the last two weeks. Incredible. There's been lots of options on the FAANGs + MSFT and Tesla + Chinese tech. But be careful. Markets are volatile and things can change quickly.

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.