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

$75K to put into a TFSA. He'd put it in 7 stocks to diversify. AMZN, MSFT, 1-2 of the Canadian banks, 1 of the railroads (or AC if you're more aggressive), a class oil company like CNQ or TOU, and a world-class global healthcare company that's into robotic surgery or PFE that will raise its dividend nicely. That presents a nice mix.

Markets. All-time highs earlier this month, and now we've pulled back by 4-5%. Totally normal, happens around 3x a year. Consensus global GDP of 6% for 2021 provides a good backdrop for stocks. That would be the strongest annual economic expansion since 1980. In 2022, expecting 4% growth. Vaccination numbers are growing around the world. Declining number of cases will provide a good backdrop. Volatility is due to inflation concerns and digesting gains so far this year.

Today's market weakness. Inflation concerns started last week with the surge in the US CPI. This is transitory. An economic restart is not the same as a normal business cycle recovery. Supply bottlenecks plus pent-up demand are combining to push prices materially higher. Inflation won't go back to zero, but spike in inflation is temporary. Usually, we see demand slowly capture supply, but they're neck and neck right now.

Focus for the economic recovery. He's not necessarily looking for more torque. He wants names that are more sensitive to the economy. In the early stages of a recovery, you want to be in cyclicals like energy, materials, industrials, and financials. It's not the right time for consumer staples.

Rotation from tech to value. YTD, the S&P performance has tech at the bottom of the 11 sectors, while energy and financials are at the top. Tech has done well the last 3-4 years, but now there's a move out of it.

Today's slide was a victory for rational investing, as Bitcoin tanked. He disagrees with wealth manager Cathy Wood that cryptos will come back, that Elon Musk will come back to them. Today was a banner day for investing, not speculating.

April's uptick in inflation was expected, though surprisingly sharp due to pent-up consumer demand and yet we still have bottlenecks in the supply chain. She expects this demand to moderate later this year and inventories are restock, which will alleviate price pressures. Definitely watch inflation--if it remains high over a period of time, the US Fed will have to raise rates earlier than 2023, then stocks will pull back in reaction. US unemployment is 6.1%, but about half that pre-Covid. So, there are still a lot of people looking for work, but as things improve, people will find jobs. Also, caregivers are at home taking care of their kids, but in the fall these kids will return to school. Pullbacks are buying opportunities, because earnings are beating expectations and reopenings will continue to be driven by vaccinations. All are great tailwinds.

Lumber stocks Lumber is highly cyclical, so don't hold them but rather eventually sell them as lumber prices turn and supply catches up with demand. Lumber is now in a weird space because prices are rising, yet there's still demand. You can still hold them for a little longer, but really watch the price turn and inventory increases.

The markets are up 11% this year, but it could give a lot of it up in order to digest all the bond issuance from the stimulus. There will be upwards pressure on interest rates. Inflation is front and centre, and this will be here for months to years.

Gold. Geopolitics does not directly dictate selling equity but what is happening in the Middle East seems to be spreading. It speaks to polarization across the world of politics. It could feed into inflationary pressure.

Commodities. Seeing a lot of supply squeeze and it is not new demand or demand pull. The supply shock is temporary. Are costs and prices going up? There are parts that are, and it could lead to a permanent higher plateau. More temporary in nature.

Educational Segment. Gold. It looks like today, we might break out of the 200 and 50 day moving average. In January, we had a breakout but that did not last on a weekly basis. Need confirmation here. The chart may look bearish for gold, but if we look at it from another perspective, it might be consolidating. In multi-year, you get a more bullish tilt. The fundamentals make clear that the inflationary aspect and negative real yields is pointing to an uptrend. Crypto has taken a lot of flow from gold however. A weekly close of $1850 could see gold go up further.

Market. There is reason to be more bullish on Canada. For 9 of the last 10 years the US market has outperformed the Canadian market. A lot of it was due to multiple expansion. Canada never experienced any of the multiple expansion. The US market could contract and then the Canadian market would outperform. Energy and materials are about 25% (vs. 5% in the US) of the market and during inflationary times these tend to do better. Banks are 20% of the TSX and do better in rising interest rates. He still sees value in Canadian banking stocks because of the tail winds: increasing loan growth, increasing interest margin, release of reserves and excess capital in the hands of the banks.