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

It is. There's been lots of focus on AI spending, and that has been quite a big stimulus. When you see the strong US employment numbers, and you hear what's going on around the world, the government spending in most developed countries is massive. 

This, combined with the spending on AI and data centres, is a big catalyst driving economies.

It's on a market-by-market and sector-by-sector basis. At different times, some sectors are very strong while others aren't. Overall, Canada has fundamentally different drivers than the US. 

In the US, over a third of the market is tech-focused. That's what's driven it over time. We're more resource-focused, and last year it was really gold that was a strong driver of Canadian markets. 

Tough call. Gold had a really big move last year. The main driver of gold has been central bank buying, and gold has become the largest reserve currency. 

With the pending appointment of a new Fed chair, people were really worried about a lot of uncertainty in the US. That was really driving gold, and it really came off once the appointee was announced. People are taking it as a positive, and it could be a catalyst that doesn't really drive gold anymore. 

Flawed structure -- pays out the majority of income to avoid taxation. When there's an economic or market downturn, it leaves them vulnerable to a capital raise.

He owns only BEI.UN and MEQ. If you want to be in the space, look for REITs with below-average payout ratios and ones that can do counter-cyclical acquisitions in a cyclical industry (this really adds value).

For him, it's MSFT and GOOG for various reasons. Their cloud services businesses are quite strong. For MSFT, its software businesses and productivity suites are quite attractive. For GOOG, online ad business is phenomenal. The two of them generate more cashflow, and their FCF yields are quite strong.

January indicates what 2026 will be like, a world beyond the Mag 7, strong performance in small caps and outperformance in the equal-weight S&P vs the S&P. Tariffs have been noisy, but have attracted capital to the US while legislation will stimulate the economy for poorer consumers. January so that start of a move into small/mid-caps that will continue. A reindustrialization of the US economy is driving this cycle. The poorer consumer is hanging in, not concerned.

He doesn't know how to value this asset, and can't explain why it's going down or how it can go up. Doesn't invest in this.

S&P equal weight because of earnings participation from the 493 non-Mag 7 companies.

Lots of reoccurring geopolitical intrigue. Under the surface in the market, a lot of long-established trends are starting to quiver a bit. 

Notably, seeing signs of US equity market broadening out -- the proverbial rising tide lifting all boats, rather than just a select (and magnificent ;) few. This is a fresh and welcome sign. The Mag 7 are down low single digits YTD. The S&P 500 was down 1% as of last Friday. However, the equally weighted S&P 500 is up ~5%. Even more telling is that the Russell 2000 is up 7-8%.
 
As to the sectors, we're seeing leadership invert from what we saw last year. Energy and consumer staples lagged last year, but are now at the top of the leader board. Technology has become the laggard YTD.

It's rather a Goldilocks environment. We have economic growth accelerating, inflation moderating, and most likely a more dovish policy stance by the US Fed. Canada's already been there for longer. This tends to be an environment where markets broaden out.

As opposed to markets led by a small group of stocks, markets with broad-based leadership are fundamentally more robust and show greater underlying health and resilience. One analogy is that in battle, the troops need to advance as well as the generals.

His team was seeing a lot of inflection points in things like manufacturing vs. services, and rotation from software and the Mag 7 into old-world economy businesses and hard assets. There was trading ahead of the frothy blowoff in gold.

His firm had probably twice the level of activity in their two equity mandates. Volatility means opportunity.

The debate in Silicon Valley and on Wall Street is how disruptive is this next wave of new technology going to be? Here's an example. At his firm, they're looking at software with a bunch of agents that would replace a dozen analysts that would normally be hired to scour stocks and come up with opinions. But then he asks himself if that AI agent tool will replace a Bloomberg Terminal?

There's some disruption definitely coming, and right now the market's debating what that means. There's an ETF named IGV -- a basket of all the software players, from MSFT down to smaller ones. In a thing like CRM (customer relationship management software), is a company owner going to build their own? Or just buy something already out there? It's going to be measured in years, and maybe decades, before it really has an impact.

Last week, he picked up a few names in software whose stock prices have been halved.

Once a year, they go through actual numbers relative to what the models told them. Biggest factor is the birth/death (of companies) model. If, say, permission was granted to open a new retail store, they know that type of business usually employs 10 people. If it employed only 6, then they have to adjust the numbers.

Last year's total was a gain of only about 600k jobs. Revised numbers might show that the US economy actually lost jobs last year. Last week some labour data suggested that labour markets were weakening, and that could have been a catalyst for some weakness last week. 

There's a lot of momentum in the one, big, beautiful bill. Earnings are still OK. But we're starting to see some decay in the labour market.

The follow-up question is whether you're a trader or an investor? If you're an investor, and you're buying once and holding for several years, it almost doesn't matter. 

Look at the company that's issuing it. If it's Vanguard, Blackrock, or any of the big ones, they're not going away and will be around for a long time. If it's an upstart ETF company, there's a viability threshold where it either makes a profit or the company goes out of business. So you have to look at the firm overall, it's not necessarily about the ETF.

But if you're a trader, there's not a lot of $$ in the ETF, and the bid/ask spread is 5 cents in and out, then that's a far bigger cost to a trader than the $10 you pay your discount broker to trade in your account. With Canadian banks, for example, the ETF doesn't have to be huge because the underlying stocks are very liquid.

One of the benefits to a CDR is that it does hedge the currency, though there's a cost to that. It's embedded in the return you get. But that's really no different than owning it in the foreign currency. Another benefit is that you can buy fractional shares, in case you can't afford a full lot of a US share that trades in 100's of US dollars.

There's no tax benefit at all. On the currency side, you'll save $$ if you're an active trader.