A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Tech sector. Digitalization of everything has accelerated multifold. Things are different now. Now we're in a perfect storm of rising interest rates, shrinking liquidity, escalating inflation, supply chain constraints. On top of that, a lot of stocks are rich, especially the ones that are more leveraged and unprofitable. On the other side, earnings are still pretty good, but that's as long as growth hangs in there. The Atlanta Fed predicted that US Q1 GDP growth will only be 0.1%. The whole Omicron situation is really starting to slow growth. It's going to be rough waters, volatile, which plays into the active manager's hands. Three tech trends this year: cybersecurity, metaverse, continued migration into cloud.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Usually, it is preferable to let winners run, whether that be a stock or a sector in general.The key is to sell into strength. Markets could turn and wipeout overweight positions quickly. Would recommend letting stocks run 2-3% above target. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
There's a 50/50 chance that January reflects the rest of the year; he thinks 60%. It depends really on the fundamentals, which are not looking great--market valuations are high and susceptible to interst rates and geopolitics could destabilize things. As rates rise, earnings that stretch into the future will be discounted. There'll be a rotation back to value and fundamentals--and there is demand for resources. Dividend paying stocks will be attractive.
COMMENT
Educational Segment. When China slows, credit is contracting in China. When markets in the region goes sideways, then China needs to increase growth by increasing credit. The cycle has been reliable at inducing forward stock prices. Since the US has ramped up the tightening talk, the yield curve is flattening again. Once it inverts, then you have to be careful. Feds are downplaying the yield curve, but this could be a place for policy mistakes. There will be trouble steepening the yield curve. Inflation is persistent. We could see the yield curve invert and a recession. Growth is likely coming from the Asia Pacific markets. US will likely pull off. Look oversees for opportunities.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Surprises out of the Bank of Canada and Feds. BoC did not raise rates like he expected, and the Feds were hawkish. Level of uncertainty is very high. Technical levels are indicating that there was a tradable bottom. If earnings remain good, markets could stabilize. Risk of a policy mistake is really big.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
The old adage of "so goes January, so goes the year" sticks. In the second year of a president is the worst year normally. There is a seasonality of it being a poor year. Hard to be bullish. Looking at international exposure. Value over growth this year.
Larry Berman CFA, CMT, CTAUnknown
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Higher rates are expected by everyone in the world and markets have adapted. In past cycles, the markets rose 7.7%, which is decent. Income investors should keep bond maturities short. Take advantage of higher rates and not get locked in at lower rates. Inflation hedge could come from energy, metals and materials. Insurance could outperform. Unlock Premium - Try 5i Free
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COMMENT
Interest rate increases caused by higher inflation are positive for real estate which involves real assets. However you need to have good pricing power involving positive supply/demand fundamentals. Geography is important - consider areas where there is employment growth. The office market is facing a headwind because of more working from home. There could be a net reduction of 15% in the office market.
Andrew MoffsUnknown
COMMENT
The growth selling may be over and the rally may have begun after today's huge move. This month has been a nightmare for growth investors after Jay Powell turned hawkish. The turning point may have been Netflix's earnings report on Jan. 20; shares tanked. Another was on Jan. 26 Servicenow reported a tremendous quarter and mentioned labour costs and other issues that weren't tied to rising rates. The day before, Microsoft reported a strong quarter, which rallied. Last Thursday, Apple reported that it had overcome supply shortages; they and Mastercard reported blockbuster quarters and no factory shortages. That said, Robinhood reported a bad quarter, but still popped. Today, Netflix's CEO reported he bought a lot of shares. He's never believed in the growth vs. value dichotomy. If you want a value stock, pick one without supply and labour shortages.
COMMENT
Carly Garner, technical analyst, predictions--some contrary Even though the FEs is reducing bond purchases, we've had two years of massive QE. That overhang (history says) will last years, not months. Why? Because QE enlraged the suppl of money. QE is relatively new, sreally started in the Great Recession. Now feels a lot like 2010-11 when the Fed injected a lot of QE which pushed stocks higher. In that period, we saw a boom in commodities just like now. Corn could head to another boom. Crude oil is near overbought status, so the upside could be limited with a strong ceiling around $90/barrel, then could fall back as low as $62, but the bottom is cushioned by the overhang of QE. A decline in oil prices could reduce the number of interest rate hikes. Gold and silver could see a lot of upside, just like in 2010-11. The market is very bearish bonds, but Garner detects a long-term bull market in metals. If Powell takes a Janet Yellin approach, his rate hikes could span years, not months. In short, the momentum of recent years will push assets higher.
COMMENT
Can Jay Powell engineer a soft landing by tapering and raising rates. Critics say Powell is behind the curve--not raising rates fast enough, so now he's sounding more hawkish and accelerating hikes. Some say he will hikes seven times this year. He disagrees, because Powell learned a lesson in late 2018 when he hiked rates quickly. This time, Powell has succeeded in navigating Covid and in allowing full employment happen before he makes a move.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Higher rates should not be a concern with a better economic backdrop. Stocks have done well in prior rate hikes. Tech has seen some quick drops, and they would be keen to step into the cheap tech names like GOOG or QCOM. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
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