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

Good news can be bad news since 2008. There is outside stimulus from the central banks and government that is propping up markets. When there is good news and the stimulus is reduced, there could be a market pause. Hopefully vaccines remain effective and this will lead to more spending on services and less on durable goods.

Energy sector. Many one car families became two car families. There is also a desire for travel. This will be positive for oil demand. Demand for power with heat waves is also another factor pulling natural gas demands forward. There will also be continued development of renewables.

Gold. An interesting set up for gold. The price has not performed as well as those who believe in inflation and gold bugs have thought. The sector has been so decimated that producers that remain are seeing great cashflow yield. Could see a more positive environment for gold. The producers at current prices are making good margins so there could be steady dividend growth out of these.

Is the economy overheated or fine? Do we need a trillion-dollar infrastructure bill when there's a labour shortage (i.e. FedEx)? A week from now, we'll get the non-farm employment numbers to answer this question. He expects continued generous unemployment benefits. Money managers aren't really worried about inflation, but rather they're under-invested and need the Fed to bail them out. Powell won't raise rates until there's less unemployment.

Markets. If recent economic forecasts are realized, we're headed toward the strongest global expansion since 1980. The estimates are for 6-6.5% GDP growth globally this year, followed by estimates of around 4.5% for next year. This is not priced into the markets. Earnings and estimates are being lifted. Vaccinations are accelerating, though the Delta variant is a risk. He's constructive on equities, though the summer season is somewhat weaker. Though the cyclicals in economically sensitive areas have backed down a bit, that's the area you want to be in going forward.

Cyclicals and value over growth. He really likes financials, industrials, and materials. It's about vaccinations moving so quickly, with case counts going down. Where he expects the economy to be in 6, 12, 18 months is very supportive for equities. Stick with the cyclicals and economically sensitive stocks. Growth stocks have come back up a little bit, which could be a reflex bounce. It's not that he doesn't want any growth stocks, but he's sticking more to the value areas.

Commodities. In this environment of supply constraint with demand moving higher, commodity prices will remain firm, if not move higher, over the next 12 months.

Geography. You won't get the depth and breadth of stocks anywhere but in the US, which he's always favoured. Seeing good value in Europe, especially financials, and in Asia-Pacific. Resource and financial names in Canada are starting to look strong. A broad approach makes sense. Right now, he's broadening out of North America and into some of the international markets.

Ideas in the financials sector. Really likes US financials and financials in general. Some of the selloff is due to profit taking, what's happening in the markets, and the 10-year bond yield coming off a bit. Over time, interest rates will move higher, and this is good for banks. JPM is extremely well managed. For cheaper valuations, look at WFC, Citi, or Citizens Financial. European names like UBS and Credit Suisse. PRU in the US is another one he owns. Valuations are low based on history.

Financial stocks vs. ETFs. Lots of great ETFs, especially in the financial space. See his Top Picks today. XLF is a good one, as it's one of the largest financial ETFs in the US.

Benefits of ETFs. A basket includes pharma, devices, and technology. It depends on the size of the portfolio and your objectives. If you're trying to minimize risk and volatility, an ETF may be the route to go for all or part of your healthcare exposure.

EV sector. With interest rates moving higher, it's hard for him to recommend EV companies, as they're at extended levels. Look how TSLA has come down. Be careful about the high valuation names. Names like GM, Ford and Honda have outperformed TSLA year to date. The value names are a better bet right now.

Buying opportunities in tech and renewables. During the pandemic, these two sectors performed exceptionally well. Now there are momentum strategies at work. Big rotation this year from the reopening stocks into value stocks, though he doesn't consider commodities as value stocks because they're so cyclical. Some of that is overdone, some of the cyclicals are ahead of themselves. Renewables have come down significantly, so it's a great time to get into companies like BLX or INE. On the tech side, some of the e-commerce stocks have come way down, though their businesses are booming and will for many years.

EV stocks and SPACs in bubble territory. Bubbles always deflate. Monetary conditions have been so slack, one of the unintended consequences is speculative buying. Pure greed at play. Bitcoin has come way down, as there is no fundamental value backing that asset, and the greater fool theory is at work. Fed will be tightening over the next few years, and the speculatives are the first to go.