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

We've seen strength in materials pretty much throughout the year. Financials have been fairly strong. Those have been two of the dominant sectors in Canada.

Looking at the US, technology has been a very strong sector. Now seeing a rotation. Healthcare, which didn't really perform at the beginning of the year, is now starting to in the back half of the year.

This indicator looks at long-term momentum, and it often gives a "deterioration" signal well ahead of what we actually see with prices (and even as markets go higher). It's been positive coming out of everything that happened with the tariffs in April. 

Right now, not seeing any deterioration in that at all. Even with the pullback in November, the indicator remained positive the whole time.

He also looks at short- and medium-term indicators. In November, the short-term reading turned negative across a number of different indices. It's since repaired itself. As with the long-term signal, the medium-term outlook remained positive all the way through that.

All this showed that it was a standard run-of-the-mill correction of 5-7% that you can expect to see every 3-4 months. That's exactly what we saw. Things recovered, and we're heading higher into year end.

A tough call. His team looks at the indicators they have right now, which are telling them that everything is positive. 

When they look at some of the economic data and the economic rate-of-change data, it looks as though we have visibility into a strong first 6 months of the year. With the move that the Federal Reserve has made in the US by continuing to lower interest rates, as well as integrating some QE and some activity with the balance sheet, things should continue to be positive.

In Canada, the infrastructure push will certainly help. What we really need to see is a control on inflation. The consumer continues to struggle. The affordability from everything from housing to fast food is off the charts. Inflation needs to come in line. We need to see incomes catching up to the inflation we've seen over the last 5 years.

It's been a spectacular year, far better than most people would have thought. He's been very happy. There are a few reasons for the massive dislocation between what oil has done and what the energy stocks have done. 

Thinks we're at the beginning of a realization that the biggest force of incremental supply (US shale) is reaching a permanent plateau to decline. We're being told that the big banks are seeing a significant increase in US fund flows and attention from US investors into Canada. We're blessed with companies that have decades' worth of drilling and inventories. Our companies trade at a discount, and we have better messaging from the federal government in terms of its support. We have incremental takeaway capacity on existing lines over the next several years.

As well, natural gas has been strong this year. He's quite bullish on nat gas going into 2026. The time will come, as well, for oil; thinks we're on the cusp of the next mega-bull market for oil.

Three big reasons.

Firstly, systemic increases owing to LNG capacity both in Canada and in the US. Secondly, increase in power demand in areas where data centres are being built out. For example in Texas, power demand is up 5.5%; for the past few decades, US power demand was growing about 0.4%. Finally (and thankfully), winter has finally arrived. We've had the coldest December in 10 years, and the forecast is for at least normal seasonal weather.

Broadly speaking, natural gas has gone from being a bridge fuel (to some future where we were going to live off solar panels and windmills) to being a foundational fuel. GE Vernova (makes gas turbines) reported this morning and spoke to clear, visible growth into the 2030s, and it's all going to come from natural gas.

Market sentiment is crappy, but you want that to invest. People are really fearful. Will tariffs be repealed? Now, we're in a pause before the rally resumes. Corporate earnings aren't too bad. Sentiment is negative. So, a good time to start investing. Technology, energy and small caps look good. Also, biotechs and financials. International markets are perking up, like Europe.

He prefers gold. They call silver the "widowmaker". It's up nearly 100% this year, a big move. Silver has commercial application in AI and aerospace. The trend is up. Gold and silver enter seasonal strength now. To follow gold, watch the biggest silver companies like First Majestic.

He expects the Bank of Canada to hold rates this week due to strong Canadian labour numbers. It's expected that the bank will hike rates late in 2026. The US Fed will likely cut rates slowly, perhaps catching up to the Bank of Canada. Powell will move rates according to economic data. Likely, the Fed will have a hawkish cut where they signal a slower path forward. A larger question: Will the Fed lose its independence under the thumb of Trump. He hopes not.

Bonds. He was shocked by the bond market reaction to strong Canadian job numbers last week. The market is pricing in a rate hike; bond ETFs sharply went down after that jobs data. The XBB has returned only 1.86% annually since end-2014, bad relative to inflation. Corporate bonds offer more yield, but also more risk; XCB-T returns 2.79% annually, barely keeping up with inflation. Both bonds and equities look challenged looking forward, so investors need to look at private markets to generate returns. As for passive vs. active ETFs, most active funds don't deviate from the index, but charge active fees. Stick with passive funds.

After the April draw-down in 2025 the U.S. budget was very stimulative. We can continue to expect a stimulative budget because of the US midterms next November and the US president will want the incumbent party to remain entrenched, so the US will be a big driver. Defense spending is a consideration. The crypto guys might be a bit disappointed. In Canada gold stocks have surprised and he thinks precious metals and gold will move much higher again, although money may start to move from gold to the Magnificent 7. As to the AI trade, to him it has the look and smell of the 2000.com era. He feels that AI is just a chip processing story with a lot of hype to it. There  are billions in opportunity in AI beyond semis. There is an overbuild for network and energy. How much money will be redundant. Also where are the AI opportunities in the discovery market and in prevention/security.

The question was on the Indian market. The outsourcing companies look quite interesting including the generic drug market. Not everyone has the ability to buy in the Indian market since you have to have a license. However some stocks can be bought in the US.

He's not sure if we'll see higher rates since there are some challenges and the economy is quite weak. So why would we not see lower rates which is not good for the financial sector. Inflation data is very important. We could see some recovery in the logistic space and the consumer segment, especially luxury items.

We've underperformed for so many years. The TSX is pretty lumpy, so there will be times when we actually outperform, which is great.

Performance is explained by our concentration in gold, metals, copper, banks & financials (which have done extraordinarily recently, with great earnings). There's also natural gas, which is finally in a bull market after years of slumber. 

Lots of tailwinds with these Canadian nation-building projects, which can be pretty stimulative and have a multiplier effect. We have a lot of power companies as well; so far they've been stable places to be, but are now fueling the buildout of the data centre push. Investors are getting pretty excited.

Put it all together, and the TSX has been just stunning.

It was a very scary, rocky year. April saw the administration announcing a financial reorganization that would right the ship from benefiting Wall Street investors for the last 40 years to benefitting Main Street instead.

CUSMA covers about 93% of goods that flow over the border. Trump toned down a lot of the tariff rhetoric to a point where he could, perhaps, claim a victory. Goods are still going through and there haven't been too many higher costs for Canadians, who haven't really seen that much inflation.

Canadian economy has been solid, and we just got more evidence of that today.

That's fine. They're all good, and they take turns at being the leader. As an asset manager, he always tries to figure out which one is cheaper than the rest. There's a truism that banks just go up over time -- they kind of do, but not in a straight line. And remember what happened to some of the world's biggest banks in the US 15 years ago.