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

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.

Canadian financials in general. The steepening yield curve and higher profitability is already priced in probably. The yield curve has seen some flattening in the past weeks. We will still have a steep yield curve for a while. Right now, would not add exposure to the banks. Sees market volatility in the next few months. Would wait for 5-10% dips before adding new money.

Crypto. You can chose either Ethereum or Bitcoin. Wouldn't call it investing, it is speculating at this point. If you are looking at which tech is probably better, it would be Ethereum with its open architecture. Wouldn't recommend to investors.

Educational Segment. Yellen came back from G7 meetings and was able to get buy in for a global minimum tax rate. One of the narratives that Yellen put forward was to level the playing field. Raising taxes on corporations to pay for the debt is a big deal. Companies have 3 things they can do with income: invest, increase dividends, and buy backs. Buy backs exacerbates inequality as it only benefits senior executives with options and shareholders. The focus on ESG and fixing inequality will become a big part going forward. Buybacks will be seen under a new lens.

Market. The market is very good at pricing things in, and in this case inflation. The market did not react to hearing there was inflation. Anyone looking to allocate capital has to make bets a long way down the road. There are values on some value stocks that are still pretty low.

The U.S. market is selling industrials and bank stocks to rotate into growth stocks, as the market eyes Wednesday's US Fed meeting. He expects the US Fed Chief, Jerome Powell, will keep rates low to allow the poor to find decent jobs. Powell has been upfront about his plan, so pick up bargains. He agrees that inflation will run its course. There are senior growth (FAANG) and junior growth stocks (Twilio, Roku, Etsy, Docusign). See comments about Caterpillar.

Technical analyst Larry Williams sees the late-June Swoop, a modest dip to a deep dive. So, sell the S&P in mid-June then buy it back after that dip. Sell on the 8th or 9th-last trading day of the month, meaning the 18th or 21st this year. This is based on strong gains over the last 22 years. Therefore, next week the market will be ugly. He doesn't know why this is so, but he accepts it as reality.