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

Markets and leveraged Chinese real estate. Across an economy the size of China, it's just a drop in the ocean. Will it create moral hazards or underlying problems for Chinese investors? A major form of investment has been real estate, so the issue is will there be a contagion effect? The Chinese government seems to be fairly on top of it. It won't be a Lehman Brothers event, though others are classifying it that way.

Market opportunities. Sometimes you get lucky, and a stock that you've held forever gets recognized by the market and gets a leg up. Also renewables, either directly or via first or second derivatives, where products and then consumers benefit. These derivatives often have the greater upside. Be wary of putting new money into sectors that have had a significant run. It may be time to trim those. You make money when you buy, not when you sell.

Reopening trades will be somewhat lumpy recovery stories. Watch the level of vaccinations. We're starting to think seriously about moving towards a recovery and what will benefit. Companies that have suffered from, but not been killed by, the pandemic offer the greatest upside. Think aviation, airports, cross-border, restaurants. You want exposure to those, but it's going to be a longer term story. Not 6 months, more like a 1-2 year trade.

Car companies and EVs. All of the major car companies are heavily discounted, but they're all transitioning into EVs. Tesla won't be the only game in town. Do your own research on names. On the fundamentals, you have to seriously take a look at the category, which is deeply discounted. Investors should consider whether there's multi-year upside from the EV renewables cycle. He thinks there is.

Buying global stocks. When you're looking to buy international stories, you want to buy the common shares, and if they're listed in the US, do that. That's the inexpensive way. If your broker can buy on the underlying market, that's good also.

Markets. Up seven consecutive months. September is historically a seasonally down month. Delta and other variants, looming Fed tapering. Not surprising to see a bit of a pullback. S&P is already down 1.5% this month, and hard to tell if it'll go down 3-5%. His cash levels are higher, above 10%, to take advantage of any potential weakness. We've already seen weakness, and perhaps there's more to come.

Not hiding in defensive stocks? He prefers cyclical over defensive. Delta, inflation, or supply chain constraints may delay recovery, but not derail it. Vaccinations are progressing, and it will take another few months to get to herd immunity of 75%. Looking out 12-18-24 months, you want to be in financials, industrials, and energy.

Covered call ETFs. When market's are strong and the underlying securities are doing well, you will get a higher distribution, but you'll give up something in total returns. He really likes the covered call strategy if you feel that underlying index is going to be flat, so you get the principal appreciation, covered call option, and the dividend. They don't protect you tremendously in a down market. He likes ZWU, a basket of telecoms and pipelines, where you get the high yield plus the covered call option premiums.

Finally, a session didn't fade into the close. Markets rallied strongly today. This could be a relief rally; the market could return to bull mode. True, there are many uncertainties, starting with bearish Sept/Oct seasonality. But a rally can endure if these happen: good job news, moderate inflation, semiconductor shortage relief, the supply chain constraint eases, port conditions improve, earnings that reflect supply meeting demand, stable input cost hikes, open schools, far fewer hospitalizations, more airline passengers, hotel occupancy rises, rising interest rates due to more economic activity and not inflation, slowdown in underwritings, more stock buybacks, and Washington and Beijing to get off the radar screen.

Consumers are in good shape, though US income subsidies are ending. Consumer sentiment has weakened which may moderate spending, but household incomes have returned to pre-Covid levels while savings rates have soared. Consumers want to travel (domestically for now), eat in restaurant and go to ballgames. Consumers make up 70% of the US economy, so these are good trends. Governments are now reluctant to impose lockdowns (she doesn't see this happening), because vaccines are taming the pandemic. Instead, governments will use vaccine passports, but this will be a catalyst to get people vaccinated. Also, companies are mandating their workers get jabbed, which will also erode vaccine hesitancy. Today we saw low US CPI/inflation numbers, is moderating. Most central banks feel inflation is transitory. It's taking time for supply to return to norm, given ongoing supply shortages. It's important that developing countries get vaxxed, or else shortages will endure.

The Liberals' plan to tax financial companies and impact on shareholders. The banks are insurers are a key part of Canadian investor portfolios. If the plan happens, these companies will manage this tax in the end. These companies make a lot of money, though the tax is not a good capital markets development.

We're not overvalued, but are stretched. Conviction in this market has slipped a little entering autumn. The recovery is performing better than expected from the start of the year. He doesn't see a massive pullback coming. The Delta and inflation are two forces investors must watch. September will likely show meaningful gains in employment that will effect stocks through the rest of this year. Inflation fears of last spring have come off; investors are gradually agreeing with the Fed that inflation will be transitory. But what fiscal packages will arise in Canada and the U.S? The Fed won't do anything drastically and won't make major moves until next year, probably.