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

Equities are not looking attractive from a valuation perspective. Still very overpriced. Markets correcting is normal behaviour. Seeing it now with traditional seasonal weakness with lots of catalysts. There are US government drama, and over-valued prices.

The government and central banks are trying to portray inflation as transitory. With the debt in the world and aging demographic, they are disinflationary trends. However, the pockets of inflation may be transitory but it could be a year or two of inflation.

Market. The problem in September was some of the warnings from companies. The problem is disrupted supply chains such as for semiconductors. We are overdue for a correction. He expects a 5% pull back. He put some money aside for it. A correction could be worse if valuations continue to go up. Interest rates might migrate slightly higher but there will be no significant increase any time soon. He is taking profits in the energy sector where he has been overweight. Industrials are depressed here. Gold is positioned well. You don't need significant increase in commodity prices.

Where are people going to in the market for safety? The Telecom sector would be his favourite as a defensive sector. They have a better ability to grow dividends. The utility sector would be hurt if interest rates started to rise.

Pipelines – close correlation between pipeline stocks and oil prices – why? He does not think you will see much change in pipeline stock valuations. Pipelines are volume sensitive. He owns four of them.

Markets have no memory; compare Friday to today when stocks plunged, especially the Nasdaq. However, the more stocks fall, the more you can bargain-pick...if you're careful. New investors may learn that stocks don't always bounce, but can keep falling. There's always a reckoning, and seasonality happens now in September into early October. History tells us the investible level happens later this month. Buy gradually on the way down and don't jump in entirely or you'll get slaughtered...Rising oil prices usually helps the stock market, but not if prices rise too far too fast.

We are experiencing inflationary pressures. As we head into Q4. thinks we will see growth that will offset some inflation, but thinks we will start to see larger swings in portfolios. Want commodities, exposure to inflation linked stocks. We are seeing a sticky side to the supply chain coupled with an abandonment of the labour force. We can't find labour and GDP rates are at 5% with a low interest rates. Have low yields, high valuation of stocks and investors need to think outside of traditional strategies.

Yields seem low with inflation being high. Inflation will be more persistent than people think. Rates for labour are sticky. Once pay goes up, it is hard to get back down. There will be persistent pressure on the labour side. Housing and rent increases, which are large parts of the CPI, will be an issue. Majority of portfolios are under exposed to securities that will do well in inflationary environments.

Markets and the economy. Not seeing synchronized global growth. Fed will taper bond buying, but rates will remain low in US and Canada. We'll see global bond tapering. We're also seeing inflation, but hard to determine if it's temporary. He thinks it is. At the beginning of the year, analysts were predicting roaring 20s type growth, but this has vanished. We'll have lower growth, lower inflation, and higher savings rates, so best to focus on technology, healthcare, and consumer discretionary like COST and AMZN. These companies depend less on economic growth. Commodities and related areas grow when there's strong economic growth. The economy is still very fragile. As rates go up at the long end of the curve, that will benefit financial services in the long run, so that's a good place to be whether US or Canadian banks.

Asset managers. Asset managers tend to involve alternative assets, mostly private equity, and it's all debt-related. They have huge amounts of money to spend. When it's really great for them is a situation like March 2020. PEs are substantially higher today. Good to own at the right time, which is not now. Wait until the interest cycle changes.

Sell any exposure to China and Evergrande? Something like BABA would be different, as all its revenue comes from China. But banks don't lend that aggressively into those areas. China is a worry from an investment perspective, as it's not a democracy. They can punish companies simply because they don't like them, and they're worried about consumer data getting into the hands of the US. Lots of growth there, but a difficult environment in which to own stocks.

US tech giants. Selloff, as in Feb/Mar when inflation was becoming a bigger worry. Tech companies are long-duration assets with lots of free cashflow in the future, such as MSFT and AMZN. When interest rates are so low, small moves in either direction can have a big impact. Also have had a big run up. This selloff is temporary.