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

Effect of rising interest rates on insurers All insurers are in a great position to benefit from rising interest rates. The long-end of the yield curve should rise later this year, so all insurers will benefit.

What to invest in if you're 57 and have maxed out your TFSA and RRSP? Much will depend on the federal budget in April. We'll see if Ottawa increases taxes on capital gains, dividends or both. The most tax-effective thing is to own stocks that pay Canadian dividends, but mix in some quality US names for growth.

Are we seeing a real bounce in U.S. stocks? We'll see a rotation back into US stocks. Many entered 2022 bullish about international EM stocks. Those had a nice rally last week, but there is skittishness over Russia/Ukraine and the potential spillover across Europe's economy, as well as supply shortages. Five rates hikes sounds better than seven. The flattening of the curve in the bond market indicates some concern over a recession, but she feels people are over-concerned about market growth. If we're at 3% growth by end-2022 that's actually not bad compared to pre-Covid. The next two weeks look better. Last week showed slight improvement in PPI and CPI, which is encouraging, perhaps inflation is trending down. We need to see a continuing trend in declining inflation and WTI crude oil falling below $100. If so, there'll be an inflection point in the second half of 2022.

Today, the street is calling for an upswing of US stocks in its outlook. Has the risk profile of the high-PE, high-growth stocks improved? No. If there are a few closes above 4,471, the 200-day moving average on the S&P, this will mean another 75 higher--that's the immediate direction. Has the risk profile of the higher-growth, non-profitable stocks improved just because the market has bounced? No. This a bear market bounce. So, areas to look at are energy, agriculture, some megcap stocks, insurance, asset managers, healthcare and medical devices. Otherwise, there's still too much risk in the high-growth stocks.

Educational Segment. The massive amount of debt in the system already means we can't handle too high interest rates. Also, this is a supply side shock and not demand side. Right now, banks have the lowest net interest margins and profitability. With banks less profitable with lending, they lend less. We tend to then get less loans and less credit expansion.

Margin pressures will be critical for the upcoming earnings season. The Feds have now spoken. War is still going. There are many things affecting the markets and none are really bullish. Gas prices are also huge on consumers. Demand destruction would mean that there is a recession. Needs to rework supply chains. OPEC will be in the drivers seat.

More debt to GDP than ever in history. Massive change in the underlying liquidity. Don't have the tools to control inflation to create a soft landing. We are hearing aggressive tightening from the Feds and we are increasing risk of a policy mistake.

The market has been very volatile - last week was a big flip from the previous two weeks. The Canadian market is set to do well and could beat the U.S. The Federal Reserve has been supporting the market and is now planning regular interest rate increases. This combined with inflation moving higher and some early signs of a slowing economy will hurt the market. With possible softer markets towards the summer, investors should become more conservative or defensive as spring moves along.

In response to a question on oil and gas stocks, the trend is they do well between late February and early May. But it has a seasonal tailwind so the upside could continue. Look at your parameters when buying and consider early May as a point to exit.

The question was on wheat. It is up a lot along with concern over the Russian/Ukraine conflict. It is experiencing a strong move outside of its seasonal period which could mean a sharp correction, but this time could be different. Not buying now because it is out of season.

The question was on the effect of interest rates on banks. There is a big difference between U.S. and Canadian banks on these effects. The U.S. banks are very sensitive to interest rates and Canadian banks less so. Rising interest rates are good for banks because of interest rate margins. Also consider the yield curve which is starting to flatten out. This is a tougher environment for banks to make money than if the yield curve is rising.

Wall Street is seeing its best week since November 2020, but he expects more volatility. QT is behind us, yet the US economy remains strong. The second half of 2022 could see lower inflation. He's focused on supply chains--if those shortages ease later this year, will the Fed be as aggressive? Time will tell. We could see some bounces in coming weeks heading into the next earnings season.

Extremely positive year for TSX (energy, materials & financials). Holds long term positive view of the energy industry. Secure energy supply in Canada is a major plus.