A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. In terms of playing the recovery, consumer cyclicals and industrials should do well as a sector. Financials such as banks, but also alliterative banking plays should also do well. E-commerce should continue its secular growth. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Market outlook. Currently focusing on mid and large caps in North American. Markets tend to remain constructive as long as central banks are. You have a receding pandemic in the US and trillions of dollars of fiscal spending that goes directly into the economy. What works may change due to the stimulus. This would be value stocks rather than techs. As a bull market continues, you get a rotation into quality value with good balance sheets.
Jason MannUnknown
COMMENT
In 2007, there were a few mortgage funds that went broke. They were canaries in the coal mine. The recent hedge fund blowups are similar. Too much leverage in the system and not enough liquidity. Must be mindful that leverage is returning to the markets.
Jason MannUnknown
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Industrial and consumer discretionary could be sectors that will see good growth. Tech also remains attractive. International stocks are cheaper currently as well. Unlock Premium - Try 5i Free
Stockchase InsightsUnknown
COMMENT
Bond yields. They could go either way in the year ahead. Big question is do we see a test of 2%? A real chance that we could see higher rates, and then the market has to start paying attention. If the 10-year gets to 2%, it gets interesting. A game of chicken. Does the Fed do curve control, which pins down the rates in the yield curve and causes a lot of distortion? But we're not there yet. Probably 9-12 months before the Fed starts to talk about tapering or lifting rates.
COMMENT
Investment grade or high yield bonds? For the last year, he's focused on credit spread. There's been very little value. He's buying mostly short-term, under 3-4 years, and focusing on government yield curve. Risk that rates drop from these heights and a chance we run into a recession. He's neutral in his spot, and negative on credit. Not a great entry point for a great yield experience.
COMMENT
Preferred shares. For preferreds, assuming they're resets, it's more about the state of the interest rate market. If we think rates are going up, preferreds will do better. You have to make a call that the BoC and the Fed will raise rates sooner rather than later. You know they won't raise rates for the next 9 months, but it could go as long as 2-3 years. Or rates could drop.
COMMENT
Are people too euphoric? No. Markets are full of optimism. Though there will be bumps along the road, we continue to make new highs as worldwide vaccine progress continues. US stimulus plans should bridge economies until we reach herd immunity. The IMF has boosted world growth GDP for the second time in 3 months, the strongest annual GDP expansion since 1980. Safe to favour equities over bonds, cyclicals over defensives, and corporate bonds over government ones. Commodity prices should continue to gain traction.
COMMENT
Inflation. One of the risks to consider. We might see 2% inflation, but not excessive. Bond yields have calmed down. Another bump in the road would be if the Covid variants get out of hand. Rapid vaccine rollout in US and parts of Europe will help the reopening trade and cyclical stocks. Though we're not feeling it here in Canada yet.
COMMENT
Hedged vs. non-hedged ETFs. Right now, with the CAD at 79-80 cents, he'd prefer to be non-hedged. Hedging is more expensive. CAD range is 70-80 cents. To take out the risk of long-term currency fluctuations, you can go hedged, but you may not get the upswing of the USD going back up against the CAD.
COMMENT
Hybrid, a world where stay at home habits have some staying power, but we'll still be going out during the reopening. Don't bother guessing what consumers will do with mass vaccinations. Instead, stick with good stocks on both sides of the trade. A hybrid economy. Like JPM's CEO said today that he expects a mix of workers staying at home some of time and returning to the office some of the time.
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