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

Global, aging population is one of the few long-term, indefinite themes. Definitely. In the medium- to long-term, you spend on medical devices and drugs as you age. That structural backdrop remains in place. Short-term, there are a number of catalysts such as the US election is over and vaccine development. Public and political perception is bestowing a halo effect on companies. These companies are growing earnings and have great clarity. This sector is trading at a 20-year discount to the market, and he doesn't think that's reasonable given the tailwinds.

What about investing in some of the experimental areas in biotech? There's a lot of rotation from growth in the markets, even though we're hitting new highs. It's not really going from growth to value; it's going from growth to momentum. He sees it in the small cap biotech space. Russell small cap healthcare is up about 75% compared to large cap healthcare up 9%. He prefers to look at good quality businesses with above-market earnings growth at a 20-year discount on valuation. Be aware of this when you start looking at new areas.

No US agenda on healthcare changes? The blue wave suggests that healthcare will do well in this environment. Political landscape has really improved. Won't see the rhetoric from the last couple of years, so it's a more institutionally investable sector.

Speculative froth in this market? He saw a statistic that 1/3 of all investors in South Korea are teenagers or under age 13. One had a 43% return last year, all in one stock. Similar to 1999. People aren't discounting cashflows to find the true value of a company. When the music stops, you don't want to be the last one looking for a chair. If you're investing based on noise, when you double your money, at least take half your cash off the table. When things turn bad, they can go badly very quickly.

Will there eventually be a reckoning with governments running up huge deficits? Once we reach herd immunity of 70-80% and people bust out of their houses and start spending again, given 30% of personal spending has been cheques from the government, inflation will start to move higher. This isn't good for the US dollar, so emerging markets will start to overwhelm the US market. Increased demand, reduced supply. To control inflation, the Fed will increase interest rates, which usually means the stock market gets clocked. We may get the taper tantrum from 2013 in the next year to 18 months.

Green energy space ideas in Europe. Brookfield Renewables, but own it in your RRSP, not in your cash accounts. In US, he owns NEE, involved in solar and wind. Prices are coming down for customers. NEE is looking at better storage, and has increased dividend at 12% clip over the last decade. It yields 1.5-2% right now.

Markets are heading to the "danger zone," disconnected to the underlying fundamentals. The froth doesn't last and people are getting greedy. Signs of froth: the SPAC surge and the cannabis craze (ridiculously valued overnight). Take some money off the table. He's seen this before: red-hot market that lasts longer than veterans like him expect, but it always ends. However, don't sell now and not everything.

Oil prices now hitting new highs The short term is tough to call. Oil markets are looking through short-term noise of lockdowns and slow vaccinations here, and to a post-Covid world. The backdrop is very strong--the glut from the demand shock from Covid has already fallen by 57%, and this is from early vaccine roll-outs in the US and Europe. So, he optimistic demand will recover to pre-Covid levels by the end of 2021, meaning $60/barrel WTI. The real impact on oil by Covid has been supply. Shale's meaningful growth is over, done. Meanwhile, big oil companies are investing more in offshore wind and solar energy, not fossil fuels. OPEC, he thinks, will come back online when demand normalizes. He expects the price of oil will rise in coming years, with $60 stretching into the second half of 2021. 2022 will be even better. You'll have to kill off demand with higher oil prices. Oil companies are profoundly undervalued. Oil stocks are well off their lows, and there's a lot of room for oil stocks, as much 100% upside. He seeks stocks that offer only 100% or more upside.

Market outlook. We are in the worst economic shock in history with millions of people permanently removed from the labour force but the stock markets are at all times high. There is no telling when this will end however. The Feds are continuing to support the market. We must be cautious in the markets. There is no telling how big this bubble will get. If support from government steps back, the bubble will pop.

Oil. Higher oil prices are viewed favourably in Canada but eventually, higher energy prices will cause higher commodity prices and ultimately drag the economy. It is part of the dynamic of the current environment. However, central banks want inflation right now.

50-day moving average. The change in what the treasury is doing with their cash, in the short run, will give us a boost. However, we will have to pay for the support eventually and this will push down asset prices. The Feds keep pushing the debt further and further down. The real infrastructure bill will be the real stimulus.

Market. He does not think there is too much euphoria in the markets. He is a big bull on the market this year. A lot of the tech gains from 2020 will continue. The Nov/Dec announcements about vaccines were like D-day moments in our war against the virus. He thinks we will move into better economics and open very safely later this year. The commodities are looking as healthy as they have in the past 4-5 years.

Semiconductor space. Everything is moving digital. As we move through 5G and do edge computing we will just continue to see this power continue. The leader is NVDA-Q in this space. See his Top Picks today. It is a good sector to have a look at.

Markets are rallying high, but investors should be careful of being overextending. There are many drivers now. He still expects a vaccine glut in Q2. The reopening trade is led by Disney. Also, the housing boom, industrials are rising, the price of oil keeps rising, banks are enjoying a climbing yield curve. New, younger investors feel empowered. And SPACs push stocks higher. Higher, there are vulnerabilities here: Covid still needs to be tamed. Rising rates will stop the housing boom. Industrials rally only if employment pick up. Rising oil prices will lead to the Saudis pumping more oil. New stockbuyers can run out of targets to run up (i.e. GameStop). And SPAC valuations can get out of control from a low quality glut.