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

Tech and interest rates. The software side is extremely vulnerable to interest rates. Growth rates for SaaS companies built into the cloud stack is such that it affects the PE multiples and also their borrowing ability. They're vulnerable to the yield curve. Still have a real yield repression by the central banks. Now at a juncture where Fed is tapering and prospect of raising rates going into second half of 2022 is going to take the real yield repression off the table. At the rate things are going, the S&P 500 could easily hit 5500 by mid-2022, and upwards of 7000 by 2023. Central banks are worried that if they don't pull back on liquidity, they're going to create an asset bubble.

Writing calls. He often writes calls when a stock gets within 20% of his price target and he doesn't really want to sell. It's pretty good protection.

Portfolio review at this time of year. He meets with clients on an ongoing basis to do annual and semi-annual reviews. This time of year isn't necessarily any busier. Looks for tax efficiencies that they can create for clients.

Tax-loss selling as a useful tool? It can be, but his clients don't have a lot of them to worry about. Markets have been pretty strong, and portfolios have been doing quite well.

Covid 19 trends in the US and Europe. This next wave is causing a bit of investor concern. Bit of anxiety and volatility in the markets, but this should be short-lived. Worst of the pandemic is probably behind us, given rising vaccination rates and anti-viral pill treatments coming down the pipe.

Not time to be defensive? No, it's more of an opportunity to take advantage of some of the cyclical areas. See his Top Picks. Latter part of the year going into the new one is historically a seasonally strong part of the year. Still likes the cyclicals. Take advantage of some of the beaten up names. Going forward, look ahead 6-12 months to see where the economy will be and where we'll be with Covid 19.

Megacap tech names in 2022 There will a lot more Fed in 2022 by tapering and raising interest rates. In early-2022, investors will have to re-price a lot of high-valuation growth that isn't profitable, and eventually they'll get to the megacap names. Look at Q1 this year and what reversed? Answer: megacap tech and the Nasdaq reversed a lot of those early-2021 gains, though has since gone up a lot since. Most troubling is that Microsoft, Apple and Tesla have made huge gains this year and in just recent months--it isn't sustainable as growth stocks are re-priced. These are expensive stocks in terms of PE.

We should test that 10-year yield level of 1.74%, the high earlier this year, and probably surpass it. Then, there'll be a lot of fanfare, yadda yadda. Actually, he thinks we won't see a lot from the Fed for the rest of 2021 apart from doing a few things around the edges, but nothing to hamper the rally. The large tech names will be fine. Mega-growth names will continue to fade. A concern is if the cyclicals move forward during deflation vs. inflation; he expects there'll be a little rotation. Overall, markets go higher.

Outlook for the rest of 2022 There's likely more upside for the S&P and it hasn't peaked. We're up 10.5% since the Oct. 4 low. We've had a good rally. But also look into 2022 when the Fed will get involved. Megacap tech will take the market higher, but he doesn't see a much higher move through the end of this year.

Year-end seasonal trades: resources/energy which will be supported because of strong demand and supply constraints. Also, miners are more efficient than ever.

Year-end seasonal outlook This market is impervious. The sell-off is likely done and we'll grind higher into Xmas seasonality. The 10-year yield reversed today; this should soothe investors.

Megacap tech outlook We will face the megacap tech sell-off, but not til mid-2022. Now, MSFT, Google, Apple, Facebook and Amazon are still fairly valued and so will continue to grind higher.

Santa Claus rally? We're still in a very long-term bull market. The GDP recovery will continue from Covid for the next couple of years. 4% growth forecast for Europe and the US. Consensus EPS is around 7%, which is low and should be easily beaten. We'll see increased EPS. Industrial shortages need to be corrected, which will lead to growth. The market gains have reflected the strong earnings over the last 12 months, but the PE ratios really haven't changed. Stocks are cheap compared to bonds, perhaps even to real estate, a lot of cash still on the sidelines, and we have the infrastructure bill. Green lights all the way down the road.