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

There's certainly been a rotation out of tech after valuations got pushed high last year. Now, the bloom is coming off the rose as investors look at stocks that are trading at cheaper valuations and more growth. Rising inflation will raise interest rates and that will effect valuations and therefore tech stocks. He looks for stocks with accelerating earnings now, not those expected to. He covers cannabis stocks. U.S. weed stocks and Canadian ones like Curaleaf have been reporting good numbers (Curaleaf today). Legalization in the U.S. continues, perhaps not as fast for some. Canada has an overhang with oversupply, but companies with niches are doing quite well. Cannabis is part of the wider market sell-off, but is compressing valuations of the big players; in the next leg up, these names will go higher.

Market. Dividend increasers are not as inexpensive as they have been. It is difficult to find 'great' opportunities, however Canadian dividend-paying equities are still attractive. He believes there are share price increases on the horizon. One of his focuses is power generation. Electricity demand is going to continue to move higher. It is driven by the rise of electric vehicles and the greening of other fossil-fuel-based power sources. Cloud computing is another big one as well as continued prosperity and build-out of the housing market. This also extends to power distribution utilities.

Copper. It is not that simple to get exposure to a pure copper player. HGA-T was graphed as an example of one. Mining companies are traditionally not good stewards of capital. It is not easy to find sustainable companies that are good stewards of capital. TECK.B-T could be considered, at a third copper. FCX-N is another go-to name but it has had a massive run. He is looking at it.

REITs vs. Banks. Both have done well this year but for different reasons. Interest rates going up has helped banks, but for REITs it is not helpful. They are coming up from such low levels that it really doesn't affect them. Retail and office are still very uncertain. He prefers industrial REITs e.g. WIR.UN-T. He is looking more seriously at seniors real estate as they were hurt so badly during the pandemic.

Cyber security. The pipeline shut down due to a breach underscores the importance of cyber security. It is critical infrastructure, serving the whole East Coast, that was vulnerable and it will be even more important going forward.

Job numbers. Starting to see upward pressure on wages. The economic data and estimates used do not account for the dynamics of covid. As we re-open, the job picture will continue to get better. Inflation is often talked about in hand with employment and wage pressure. Paying people to stay at home is also hurting a bit on job growth.

$1.3T of new bond supply. There is a deficit of $600B in new bonds. We did not have this last quarter. Now we have $600B being sucked out of liquidity. Liquidity has boosted markets and it can deflate markets when it changes currents. There will be some challenges in the next few quarters.

Educational Segment. Commodities are very cyclical. It depends on the cycle and which commodity. Looking at PICK, which is an ETF that gives you exposure to base metals and mining, it has seen a major move up close to previous highs. Looking at individual commodities, you can see that the copper story could be a fundamental shift that is different from previous cycles. Other commodities like corn and soy could see a new base price but right now we are in a spike market. A lot of the commodity spike is supply driven. Crude oil is the opposite of copper. As we electrify, this sector is at the start of a longer term secular downturn.

This is no market for young investors--tech stocks slid today. Confusing and terrifying for them. This is a market for grizzled veterans. Nasdaq stocks are sources of funds and they got hammered today. Instead, the remaining bull markets are mines, oil, infrastructure, homebuilders, transports, raw materials, consumer products, agriculture, chemicals, drugs, and banks. These are driven by current demand, such as homebuilders, which extends to home furnishing and mortgages (i.e. Best Buy). Other examples in these sectors: Pepsi, Freeport-McMoran, The Gap, Dow.

Market Outlook. We are seeing a divergence between what the indices are doing and what the average stock is doing. The major indices are dominated by a number of stocks. The stocks that moved that market off of the bottom, which were growth and tech, have been going sideways for the most part. You also have cyclical, resources and financial stocks are doing much better. However, since they only make up a small part of the index, we are now seeing this show in the composites.

Copper. Outlook of copper is very good. China is coming out of covid earlier than others and the demand is high. The renewable market requires copper too. There is also a supply issue due to the low historic price of copper. It will take quite a while for supply to catch up. Likes the mining stocks like RioTinto.

Weak jobless numbers today eased fears of the Fed hiking interest rates anytime soon. Markets rallied to record highs. Stock buyers have a month to trade without worrying about rising rates.

Tech stocks wobbling. Issues with valuation, especially on the software side, and this migrated into the semiconductor side. Some of the SaaS stocks are second-guessing themselves. Twilio's earnings last night are an example. The cloud side is doing well, and semis have recovered nicely. Earnings from the big mega-caps last week have made people wonder if it can get any better than that, and so they're taking profits. Next quarter is in July, and the concern is about comparables to the last quarter and to last year.