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

Last year was mainly driven by the resources complex. Gold prices have rallied a lot, after about 10 years of waiting for them to do so. Now it's happened on the back of geopolitics and other dynamics. It's anybody's guess where gold prices are going. 

Overall, Canadian markets have benefited tremendously from that. Canadian banks also did really well last year and carried the benchmarks higher.

At the same time, it's been a very bipolar market -- some industries are under pressure. A number of tech companies really underperformed last year on the back of AI threats. Question marks about whether their business models will be challenged or not and what AI developments mean for those businesses. So last year was a unique environment -- some companies did tremendously well, but others are under quite a bit of pressure.

A solid hold. Long-term outlook remains pretty healthy, especially on the commercial side. Residential side is not doing as well. Provision for credit losses has been going higher, but nothing too alarming. Doing a pretty good job on expenses. Sees growth of 10+% for the sector this year, and potentially next year as well.

Also likes their high capital ratios, as ROE is trending higher. Regulatory environment is becoming more favourable.

Rebroadcast of yesterday's show.

Get out the crystal ball, right?  :)  His team looks at a number of top-down indicators that range from short- to medium- to long-term. They also have an early warning indicator. Right now, all of those indicators are positive. 

When they take a snapshot of today and moving forward, they're constructive on the markets. That means that they're fully invested. Those dynamics and indicators can change throughout the year. When they do, that's when the team makes changes to portfolios. 

Looking at some of the underlying economic conditions, they actually look quite healthy. For example, the rate of change of inflation continues to moderate downward. That gives central banks more room to lower interest rates, which is positive. We've also seen strong earnings across the board. It started off with just the large caps, and now that's starting to move down-cap. We've seen really strong performance this year from the Russell 2000.

There are a few areas where you always want to pay attention. One is earnings. We're heading into earnings season for Q4. We'll really want to watch and see what guidance looks like.

The other area of caution that he has his eye on is the rotation that seems to be happening between Canada and the US. Money flow has been so strong into the US for so many years, and now it looks as though it's actually flowing the other way. The Canadian markets outperformed last year, and that could happen again.

The other space to focus on is the relationship of the Mag 7 to the other 493 stocks in the S&P. What's happening to capital flows there? A lot of money has moved into the Mag 7, and there have been a lot of specialty products like the single-stock ETFs. What does the rotation mean for those stocks?

He's seeing more sector rotation as well. The discretionary sector continues to do really well -- fascinating, as consumer sentiment is very low. 

In the last few months we've also seen a move to industrials, which is really positive for the economy. These include the truckers and the rails, moving freight and goods. This indicates that there's going to be strong economic growth as well.

You always have to keep your eye on our banks. How sustainable is the move in the banks? We had great performance last year from bank stocks. As earnings trickle in, it'll be interesting to see what happens to the prices of those stocks.

He has no exposure right now. The sector falls just a bit outside of his rankings right now. His firm looks at earnings acceleration. A lot of companies in the sector have strong future earnings, but they haven't been accelerating in the short term.

As nuclear projects are added (both big reactors and small), that just stokes more demand for uranium. It's tough to mine, and challenging to discover and build mines. There's a time lag there. Investors are always forward-looking, and as demand continues to pick up, but supply doesn't increase, they can see a boost to earnings down the road.

His fund has a fairly good-sized position in gold, and he's comfortable with that. Looks as though the move in gold can continue. That said, both gold and silver are very overbought on a short-term basis. Prices are getting fairly extreme from, say, the 200-day MA. When that happens, it's not unusual to see some pullback and consolidation.

You have to be prepared for that. If you don't have a position, that's when you want to enter.

At the top of the show, we talked about rotation among sectors. Fascinating that even with the decline of oil since June, some of the companies in the sector are rising up in his rankings. Anytime that happens, they start to pay attention.

That's telling you that the capital efficiency and discipline of these companies has been so good over the last few years that they've been able to generate cash even with a lower commodity price. Market's starting to anticipate that, as global demand picks up, we'll probably see a higher price in energy. As a result, some of these stocks are doing better as investors look ahead.

Leave the political discussion at the dinner table and don't let it infiltrate your investment strategy. It's difficult, but political actions are here today, gone tomorrow, and markets see through that. For example, the market looked past yesterday's Fed independence issue. Stay focused on company fundamentals and ignore the headline of the day. Gold: it's a risk asset and it's run a long way. In the big picture, gold is a lagging asset, lagging the main indices by a lot. Tariffs: some Canadian industries are disrupted by Trump tariffs, but tariffs tend to be negotiating tactics.

What's worse than a high rate is getting no credit at all. The danger is that credit card companies will bar some people from getting a card, because at 10%, the company doesn't want to take a chance on some people. This is unsecured debt and the write-offs are large. He expects this 10% idea to eventually die, because it would be destructive to financial markets and card holders.

Highly volatile. Silver is for the professionals.

No show today.