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

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.

Tough to find truly cheap stocks? Yes. Price to earnings still look a bit expensive across the board. Earnings won't pick up all at once. Be acutely aware of the valuations we're paying for companies.

Where to park cash? Not a believer in timing the markets. But where you have profits, take some off the table. You could look for a company that you think has even more upside. Limited areas for cash to earn you anything. He owns 30, 60, 90-day paper. Money market funds earn almost nothing.

Sell-offs are gifts for those not bullish enough in the reflation trade. He expects a robust US earnings season. Financials, industrials and even tech hold strong gains or value, though pockets of the market are frothy. Rising Covid cases in India and Philippines warrant his attention, though. He's been buying hotel and leisure stocks ahead of re-openings there. These sectors will benefit in the coming 12 months. Israel and US data tells him these rising cases will eventually pass. Fixed income and interest rates remain a worry this year. Rates will likely creep back to 2% eventually, but Fortis, Emera and Hydro One still offer bond-like yields.

Canadian Federal Budget. It is a difficult time and balanced budgets have been thrown out the door. It is important they spend money prudently and invest in the future. Free handouts are not productive in the grand scheme of things. Would like to see investments for future tax payers. There are signs for it so is looking forward to it.