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

Not necessarily about reducing all of their equity exposure, but being more selective in the businesses and companies they hold. Favours high-quality companies and earnings that lean toward commodity exposure in Canada, while adding a lot in international diversification.

A market that rewards discipline. Remain nimble as politics, geopolitics, and earnings are reshaping leadership. Stay focused on quality names with pricing power and strong balance sheets. Companies like MSFT, COST, and RY -- businesses that will continue to do well whether the economy grows at 1% or 3%.

Not making big moves right now. It's one data point at a time.

It's been more a story of equal weight. Metals had a stunning January, and then this incredible fall -- now trying to base. The S&P is testing its 50-day moving average right now and so is the NASDAQ. Lots of things going on.

We've seen a few reasonable things in the last week or so. Inflation is coming down relatively in check, US employment numbers have been pretty good. All eyes are on earnings season -- everyone expected them to be up 11% for the quarter, but they were actually up 14-15% and that's really great.

What drives markets? It's earnings and interest rates -- both these things are cooperating fairly well. For the most part, tariffs seem to be passing through and not causing big inflation. 

The concern was, and remains, the new Fed chair. Is he a hawk, or is he going to try to lower rates? There's uncertainty there. 

And we have this overall theme about software bleeding out. But remember, software stocks are now trading ~20x PE, which is their normal level. They were so very inflated at the start of the year.

All this behaviour is to be expected in an unfolding bull market.

This is the question -- are they overspending? We really have this dispersion among the Mag 7 into winners and losers. Lately, GOOG's been winning. 

The market seems to be thinking that there are very few winners, at least in tech land. The truth is that these are the smartest companies in the world. They're not spending $180B for nothing; they see the return there. Valuations of most of these companies are very reasonable. 

Take GOOG, for example. It's trading ~21x PE for an 18% growth rate. MSFT is the same. So they've all come into very reasonable territory. There will be a time when this is not the trade anymore (he promises). But for now, it remains a really good investment to buy on dips.

These companies were enormous free cashflow monsters, and they're not so much anymore because they're doing all this spending. But he thinks it's really going to pay off.

Comparing BAM to BN in general, the parent BN is probably the better way to go. But the dividend is important as part of the total return.

When you look at the Brookfield universe, BEP.UN gives you about a 5% yield. The yield from BIP.UN is a bit more than that. There are times you do want to own the satellites.

For all the Canadian banks, expects this quarter to be very constructive. Upside to margins, even with lower loan volumes. Credit losses remain manageable. Typical PE for banks was 10-12x, now 13-14x -- investors are getting comfortable with that shift, but there could be some fickleness there.

Need to draw a distinction between Canadian oil stocks and the rest of the world. Canadian oil stocks should outperform, due to years of underdevelopment and now we're getting resources off shore and our differentials are narrowing. All great.

Energy's benefited from the "everything else" trade. Also a pop from possible conflict with Iran. Expects oil prices longer-term to have a hard time in 2027-2028. He'd be fading the rally.

He'd be buying nat gas stocks, such as TOU.

We're living in a world of fear. Profound change is happening. AI will change the way we live. A lot of companies will really benefit, and there will be those that will be hurt. 

Investors are asking the right questions.

S&P 500 still remains very healthy -- earnings growth for the year still expected to come in between 8-10%. That resilience will, hopefully, be bolstered by a stable job market and Fed rate cut (or cuts). 

Midterm elections are coming up, and those typically introduce a lot of policy uncertainty. 

Continued overhang of capex in AI and data centres among the hyperscalers -- this year it's going to be show me the ROI (return on investment). They'll need to show how they're turning investment dollars into revenue. 

His firm is being fairly patient. When you look at what the capex was last year, it was around $440B. When they reported Q4, the numbers have come up dramatically. Projections are for $750B for 2026, and $900B for 2027. Some of them have over $1T as we approach 2030.

Those capex numbers have to translate into profits for the hyperscalers. Typically, hyperscalers would show 2-3 times their capex in terms of profits over the next several years.

If we look at current estimates for profitability for these companies, they have to come up dramatically to support the ROI expected from the capex spend.

People are moving from the speculative hype of last year toward measurable productivity. Generative AI will have more to do with cost efficiency and margin expansion than with pure revenue growth. 

In the news over the last month or so we've seen how the productivity of companies and professionals (lawyers, accountants) is benefiting dramatically from using these tools.

Lots of chatter on this topic right now. These would help the US banks, by way of supporting the consumer and overall lending. Positive for stocks broadly speaking, as well as for the banks.

Microsoft, Amazon, Netflix and other tech names are getting rotated out and into defensive stocks, like value and dividend stocks. Also are seeing flows out of the US and into Canada. She's nervous about the markets, but less so about the Canadian. Valuations are historically high in energy, but where else can you put your money? The energy trade isn't over yet (i.e. Enbridge). Gold is the flight to safety, but how safe is it when multiples are this high? She likes Canadian banks, but have moved up so sharply the past year so won't buy them short term, but likes them long.