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

It's driving him nuts that people keep calling a peak. Peak is a curse word on Wall Street--it means "done." The peak means stocks stop going higher. Cyclical stocks right now can make fortunes as we reopen. Some feel that this recovery will be gigantic (stimulus money, businesses reopening, jobs). He's confident the U.S. economy will have real momentum this year and even into next year. It's been decades since we've seen a strong economy and maybe we don't see it now. Then again, others see a peak now. Some money managers are getting out now, but it's absurd. We haven't yet seen Americans truly spend money after a year of not being allowed to spend on entertainment, travel, restaraunts. A peak is absurd.

Market outlook. As a general rule, buy quality at a good price and hold it for the longer term. Take advantage of the opportunities that are ahead. Cyclicals are a theme in the next little while. There will be a need for balance with cyclicals and growth.

Stay at home stocks. A lot of them have come off their highs because people are at home day trading. These stocks will come back down to earth. The better trade was to buy quality stocks, sell into strength and ride it back up again. You want to buy Disney over Netflix right now for example.

Large sustainable companies with good cashflow that will increase their dividends are promising right now. Growing companies like Visa are also to be looked at. The dividend yield is skinny still and is growing. Nestle, for example, is gradually growing dividends and it is steady. Some of the larger dividend stocks sold off due to money flowing into growth stocks last year. Maybe it is a good opportunity. However, you cannot completely discount growth stocks either.

Markets. Clear signals we're in the early stages of a new economic cycle. Many investors are focusing on secular growth stocks, and missing opportunities in the more cyclical materials, agriculture, and industrials. The cyclicals probably have a long runway and are relatively inexpensive.

Commodities. If you look at the RJI ETF or the DBC, only about 4 months ago we broke a 14 year downtrend. Positive outlook should go on for several years. Themes like electrification will encourage incremental demand in things like copper. You have to pick your spots, and this is one of them.

Oil. Across the commodities sector, agriculture was the first to break out, followed by forestry, and then base metal miners. If you look at the XOP ETF, we still have to break the downtrend. Bigger headwinds in energy than in other sectors. Some companies have become stronger through the difficult times, and he has some positions there.

Reaction to earnings. Don't look just at what the earnings are, but how the market reacts to the news. Not the first day, but a week to 10 days out. How is the market digesting the news? NFLX is one of the casualties of not over-delivering enough.

Lumber price affecting homebuilding demand. The question is if there's pricing power to put through to the buyer. It seems that there is. After years of very little movement, prices are now going up. He likes the suppliers to the homebuilding industry, as well as the builders themselves.

Gold and silver. If you look at the GDX ETF, it's broken out of consolidation since March, led by Newmont and FNV. We've started the next leg higher in gold, and this will be significant. An asset to hold if you believe money printing is going on. This is a sector you want to own once in a while, like now. Since March, miners are outperforming the metal itself. Companies will generate significant cashflow. Silver is an industrial metal and should do well.

Canadian banks. Not a time to hold significant cash. Asset prices are inflating to offset global liabilities. Have to take central banks at their word that they will continue to push monetary policy and that fiscal policy will continue to push growth. Make sure you own things that will hold their value. Canadian banks have been a great place to do this. Great history of deploying capital effectively and growing dividends.

The reflation trade. For a while, large cap, secular stocks like NFLX were the only places for growth, as so became expensive. In a reflating economy, we have surging demand across many industries. Many companies have significant uptick in earnings growth, and are less expensive. NFLX is a long-duration asset, and less attractive with inflation. It was one of the casualties of not over-delivering enough. He's reduced his tech position significantly in favour of cyclicals.

Not a typical recovery? No. It's been a self-imposed recession by closing the economy. Can't be certain about the economy just roaring back, but it will be in fits and starts. It's time to be careful. Y/Y gains look deceptively good because we're coming off such extreme lows. Be thoroughly conservative in your investments. The base has broadened, but valuations are not inexpensive. Wouldn't hurt to have a fair bit of cash on hand in case of significant downdrafts, which is not out of the question. Stick to your knitting, and invest in those companies you have confidence in.