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

Evaluating an insurance company. They tend to get valued off price to book value. But there's also a correlation to ROE that a company generates. Manulife, for example, trades at 1x book value. Sun Life is 1.2x, and Great West Life is between 1.5-2x. The higher ROE generated, the higher price to book value, and the higher the PE multiple.

Canadian banks. Banks have a lot of cash on the balance sheet because of share buyback and dividend restrictions. Those should get lifted later this year. There's more room to go. Likes the group. Dividends should be increased when allowed. Wealth management and capital markets have been doing well. Loan growth should return. She owns a few. Likes RY, and see her Top Picks today.

Lumber sector. She hasn't played in the lumber space, as it's so cyclical. Lumber prices are rolling over. Could be due to hoarders now releasing supply, and home builders pausing because of the high prices. Eventually, supply will come on and bottlenecks will be alleviated. Wise to take some profit.

Jerome Powell's comments today Yields rose today in reaction, but mostly 2- and 5-years; 30-year yields didn't move much, which tells him the market is starting to price in a rate hike, which may be more agressive than we thought. Fed is starting to price in a rate hike. With the dollar moving higher, it could drag on commodities, and could make this a transitory blip in inflation. We could see commodity prices come down, though maybe not a deflationary spiral. Powell accomplished what he set out to do--cool down the inflation market narrative. Problem is, if we get a much stronger dollar, that will slow global growth. The dollar is a new VIX. There are also supply-chain constraints. And this all could lead to deflation. Watch housing stocks. If rates rise, that will hurt and reduce the housing market. The taper has begun, really.

Jerome Powell's comments today He's intrigued Powell said he's not ready to declare victory yet, but that's complete horse-hockey--he's saying this way too early. Thought it's been derailed in recent weeks, the commodity trade will continue to work. The banks will get a lift from his comments today.

Jerome Powell's comments today He talked about supply chain disruptions which are freeing up. Stimulus money will eventually end. He thinks we're in a deflationary spiral. We entered the pandemic in a deflationary environment and now we're flattening out. That's why we're not seeing inflation spikes. Even if rates flatten, he's long many value (diversified chemical) plays. There will be a HUGE reopening band, which could counteract any non-rate spike.

Jerome Powell's comments today Powell was focused on an uneven labour market which is what they're basing their policy on now. What also stood out was that the Fed clearly upgraded their inflation forecast, and the Fed regained their credibility in the market. They're not asleep at the switch and could make a reaction (in rates) at some point. That's what he took away. Regional banks moved up nicely today, but not materials. The dollar is the biggest story today, up 1%, which may reflect the market pricing in inflation. All we heard today was an upgraded GDP. Ultimately, the Fed wants to get to full employment.

Biden-Putin summit today We need diplomatic dialogue, not silence, between the two countries. But the more important Russia dialogue is with OPEC to stabilize the oil price. Russia amounts to only 5% in the MSCI EM, but the diplomatic story today was important.

For now, the market is rotating back into big tech, but really we're watching watch the Fed will do with interest rates and where inflation will go. Truth is, he doesn't know and nobody knows. So, take a barbell approach to do well either or any scenario that happens, whether the Fed keeps rates low or raises them. FAANG will have their day in the sun, but he expects cyclicals/reopenings will return to the fore and rise again. There are a lot of unknowns, but the economy is on good footing and the outcome is likely positive. Part of inflation will be temporary/transitory, due to supply chain disruptions. For example, the price of lumber spiked, but has since fallen 40% from its peak. Brookfield sold their position in West Fraser Timber, which is a signal.

Rising CAD effecting US stocks for Canadian investors Yes, there is an impact, but take a long-term view. The CAD has ranged from 60 cents to $1.07 and now it's in the middle. The first portfolio he managed has risen 37x since 1986, over the years, while the exchange rate has fluctuated 5%.

Fed meeting on Wednesday. Doesn't think they will change opinions on anything. There will be some information on inflation and updates. Big focus on Jackson Hole conference at the end of August. Commodity prices show that after a certain cost, the cost becomes prohibitive and modulates this.

Oil. Higher gas prices is a pure tax on the consumer. There has been a year or two of under investment in the area. There are calls in the shorter term for these prices to go higher. It is in OPEC's hands. Supply will come on from Iran later this year. Lots of moving parts. More gas prices go up, there will be less consumption in other areas.

Israel government changes. We are seeing an even more right-wing government come in. Troubling for peace in the Middle East. Geopolitics coming out of the G7 meeting is also on the radar. Can be disruptive in the bigger picture.

Duelling infrastructure bills in US. The build proposed by Biden is billions but over a decade. Needs bipartisan support. Without it, there will not be any substantial moves without it this year.