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

US financials seasonality. We're just starting to see the seasonality for US financials, which usually runs from mid-December to mid-April, though it can start in January. US financials have recently pulled back compared to the S&P 500. They're much more sensitive to interest rates than Canadian banks, because the Canadian banks have much higher dividends. US financials react strongly to inflation and interest rate movement. At the beginning of the year, inflation and interest rates tend to pick up. He's bullish on both US and Canadian banks. In the States, he uses the XLF, which should do well coming up in the new year, especially if interest rates and strength in the economy start to pick up. If investors can look ahead to when Omicron numbers decline, which they will, they'll see this sector do quite well seasonally from now till mid-April.

Tech ETF right now? In the US tech sector, granddaddy of ETFs is the XLK. There are some tech ETFs in Canada. Tech did extremely well from late October until early December. Seasonal period takes a brief hiatus, and then picks up again until late January. Performing well. He was overweight tech, but has taken that back as he transitions to the new year. Rotation might take funds away from tech towards the end of January. We're still in the window, but it's getting late to issue a "buy". If you're a trader, there could be some opportunity for the next month or so.

Auto sector. Hard to predict when bottlenecks will resolve. Everyone's pointing fingers. If he had to guess, earlier in 2022. Already seeing cargo ships rescheduling, and other active measure. Right now, it's still a mess. He'd hold off. We're in the seasonally strong period until February, and we might actually skip that this year. Wait to see more progress.

Thinks "Santa Claus" rally will occur next week because of momentum and quantitative traders who believe in growth stocks. Biggest lesson investors can learn is "don't fight the Fed". If Fed tightens rates, equities will go down. Higher interest rates will lower earnings and increase market volatility. Diversified portfolio can protect from rising interest rates. Generation of investors who haven't experienced major crashes (1999), who he expects to keep buying dips.

Market Outlook A big lesson for 2021 through the pandemic was that for as fast as things fell, we as human beings adapt quickly to a new normal. We can thank science and technology. His portfolio is expecting somewhat higher interest rates, which would be healthy. Corporate profits should be very good for companies and higher bond yields will be bullish. Many company's balance sheets are in great position, so even higher interest rates won't impact these companies. High yield bonds tend to do well during periods of rising interest rates. From a credit perspective, issuers are in great shape, balance sheet wise, which makes him think this category will again dramatically better low yield bonds next year. He thinks energy stocks are too volatile and are highly correlated to commodity prices. He thinks oil prices above $75 will not likely be sustainable.

When was the last best buy opportunity? COVID was an excellent time and they told investors to get in. The other time was when he bought his house after 911, when it was worth 25% less than before. The world will never come to an end and we as humans will adapt. Always buy book quality companies.

A high yield bond ETF recommendation? One needs to have a diversified portfolio as there will be defaults from time to time. They tend to be shorter in duration, therefore, less sensitive to interest rates. He does not have a specific ETF to recommend. He advises that most high yields are in US dollars, so look for an ETF where the currency is hedged.

Is Covid finally on the run? Good news about the virus lifted markets today: 1) Omicron may not be as deadly as feared, especially if you're vaccinated (South African data suggests Omicron peaks in a few weeks); 2) US approved Pfizer pill treatment today which could become widespread soon (120 pills by end-2022, says Pfizer); 3) scientists at Walter Reed Hospital are developing a vaccine that can beat any Covid strain. So, this could mean no more lockdowns slamming economies; schools will stay open. Such optimism means that travel and payment stocks are flying and recommended (i.e. Visa, Royal Caribbean, Delta, Disney). South Africa today said that 1.7% of Omicron patients were hospitalized vs. 19% of Delta variant patients.

Sometimes tax-loss selling offers bargains this time of year, but not always. Normally, you get a Santa Claus Rally then the January Effect, but markets have been so strong and run up for the past 1.5 years, so maybe there is tax-loss selling now. But but the bigger worry is interest rates. Central banks seem to be raising them after keeping them so low. We've seen asset inflation and now inflation in the real economy, so rates could rise, which will pressure asset prices. Governments have been pumping so much money into the system that no real inflation like in the 1970s has happened. But this could change in 2022.

EV stock to buy? He owns no EV stocks, including Tesla. It's a tough sector from a PE perspective--valuations are too high. One could say these are not EV stocks at all, but rather a way of transforming one's life. There will be big opportunities in this space, but during Covid, people have changed how to get from point A to B. Three of his four adult children don't drive and the younger generation will see driving differently from his generation.

Car stocks? If you believe that EV's are the wave of the future, maybe take a look at the traditional car companies. He owns no car stock or parts makers like Martinrea or Linamar. The wider supply chain squeeze may make people think no cars are being sold, and car lots are offering so few cars now. But the demand is there. There are waiting lists even for basic cars. There could be a rush in car sales and a bump in revenues.

Elon Musk Times person of the year. Have been suggesting Tesla since the inclusion in S&P 500. A lot of news is priced in already. Reminds him of the dot com bubble before it burst. The renewables and green energy might be peaking too.

Infrastructure and stimulus bill. The blockage by Senator Manchin is probably an election play. 2022 is a mid-term election year, and there will be a bill. He thinks it will be done towards February.