A Comment -- General Comments From an Expert (A Commentary)
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Premium contentCOMMENT
- Johnson & Johnson (JNJ-N)
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COMMENT
Markets for the rest of the year. Three things to think of. First, what is the economy doing? Second, what's the policy response both fiscally and by central banks? Third, what's being priced in? Very strong year so far, except for China. Cyclical parts of the market have done well. Now the economy is starting to slow down. Going forward, with less fiscal support and with tapering starting, there's a bit of risk into the fall. All-time highs the last month, so not much of the slowdown is being priced in. He's cut his cyclical and economically sensitive exposure. Recycling proceeds into more defensive names and sectors. 5-6% cash. Not super negative, but tilted more defensively. Weak seasonally, combined with the other factors, makes him more cautious than earlier this year.
COMMENT
Sugar high of massive stimulus? Sugar high and caffeine high at the same time. Three signs of a bubble: people are borrowing to invest, lots of new securities are being issued, massive participation by retail investors. All 3 boxes are checked. But can you go all cash and sit on the sidelines? The market could continue going up for years. He's trying to stay invested, but be as defensive or as aggressive as needed. Focus on risks, not just on the returns. If you do that, the returns will take care of themselves.
COMMENT
Canadian banks. Terrible idea to take a large amount of margin right now. People feel that they can take more risk and borrow against their portfolios. Not time to be that aggressive. Lot of risks for Canadian banks. Mortgage portfolios are expanding, housing prices are up 30-40%, and this is a lot of risk in an economy that's slowing. He's maximum underweight banks. Once or twice in a career, you get to a point where the banking sector is facing risks not priced in, and we're as close to that as we've been in a long time. Canadian love their banks and dividends, but the banking sector is facing a lot of risks and investors need to be paying attention.
COMMENT
Sell for cash or hold? Look at size of each position. If north of 10%, you have to really like it. 5% is more reasonable. Tax implications of taxable account vs. RRSP or TFSA. Do your stocks pay dividends, or are they more focused on capital gains. 5-7% cash right now is appropriate till end of year. If you're thinking of trimming from 3% to 2%, it's not going to have a meaningful impact on your portfolio. As a general rule, if something is keeping you up at night, your position size is way too big. Right size it, and drive on. If you raise cash, you'll have it if the market tumbles in the fall.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. If inflation continues, 5i recommends reducing exposure to utilities and dividend stocks. This is due to inflation usually leading to higher interest rates. Metals, gold and healthcare tend to do fine in an inflationary environment. Industrials are also fine if economic growth is present. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
The past year we've seen a shift from growth to value stocks, triggered by the first vaccine news last fall through March/April 2021. Since the spring, we've seen a rise in Delta which could delay the recover. The value rally is on pause. He'd buy cyclical stocks that will do well in an inflationary environment. He adopts a barbell strategy in case inflation (wage increases) last a little longer than expected, but remain temporary. Iron ore and potash are commodities worth buying. He's also looking for discretionary and tech growth stocks, but not the megacap techs in case we run into stagflation.
COMMENT
Lots of opportunities in the market. Believes in the small cap section in Canada, in particular. The big cap stocks have carried the headlines but small and mid-caps have now registered bottoms and the bull market has returned. JP Morgan team also reported the tides to be positive for small- mid-caps.
Robert McWhirterUnknown
COMMENT
Certainly some storm clouds on the horizon. US unemployment numbers fell short. Number of states are still giving additional benefits. In states that have reduced benefits, people are going back to work. Select shortages in the supply change are probably temporary. Outlook remains positive in certain spaces.
Robert McWhirterUnknown
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Difficult to know when the Feds will begin tapering. Could be before the end of the year, or in 2022. Liquidating positions to time the market is not recommended. The signal to begin tapering and market volatility would be a buying opportunity. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Japan is rallying to a 30-year high after their PM resigns He feels this is the most important story in markets now. For 30 years there's been a trade where you borrow Japanese yen and use it to get US dollars and buy US stocks. This is why the USD-Yen is strongly correlated to the S&P 500. Every bank and company in Japan is taking money from Japan and investing in the U.S. because they can't get a return in Japan. BUT with the PM resigning and the potential for more stimulus in Japan that'll put money into people's pockets, the Japanese stock market should take off now after basing for the last 30 years. This is huge, because all of those flows over the past 30 years COULD reverse and it will hit every asset class. Remember, Japan is one of the biggest buyers of U.S. treasuries. So everything in the last decade could be upended. Any party will likely issue stimulus during an election.
COMMENT
Markets shrugged off today's disappointing jobs numbers The market is digesting today's numbers without getting shocked. Bad economic news is good news for the marketplace. It's healthy today that the market was not shocked. Maybe we're still in a sweet spot, but he's less optimistic and feels September will see a 5-7% pullback. Overall, stay the course in the market. Investors are getting complacent. Weaker job numbers increases the odds of more government stimulus. Also, bond yields rose today, which makes stocks a tiny bit less attractive. He's a little skeptical about fall seasonality.
COMMENT
Markets this time of year. Lots of cross currents. "Sell in May, go away" didn't happen. September and October can be dramatic. Lots of analogies to 1929 are flying around. He's seeing markets continue to hit all-time highs, especially with the large caps. Tech in the US and large caps have done well in last 4-5 months, moving the TSX and broader indices to all-time highs. Now seeing a rotation, where small and mid-caps had been consolidating, but more of them now starting to perform. Many are just on the cusp of starting to take leadership positions away from the large caps.
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