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

Wall Street rallied today because of stimulus hopes despite bad news (disappointing jobs report, rising Covid cases). Will we really get stimulus? If there isn't progress this weekend, he fears markets will get hammered Monday. We absolutely need a stimulus deal, even a small one. The markets are divorced from the horrible reality of Covid.

Most important factors driving markets right now? We've moved from a disinflationary to an inflationary cycle. Evident in US dollar weakness, yields are starting to back up, commodities prices, short cycle assets that benefit from a strong economy. Markets are looking beyond Covid and trying to position.

Which stocks do well in an inflationary environment? The opposite of things that have predictable earnings such as utilities, REITs, consumer staples. So, companies where an uptick in demand means a lot in profitability. Commodities which have limited supply, like copper.

How should investors play the falling US dollar? Tailwind for certain assets. US dollar is a safe haven. When people become more comfortable with risk, they take money out and put it in riskier assets like global stocks such as Japan or Taiwan, emerging markets, machinery companies. A different story entirely from building a portfolio that benefits from falling rates and is immune to the business cycle.

How do you decide whether to sell when the entire market's going down? No matter how good companies are, they all go through bear markets. The bear this year was the fastest and sharpest in history. He uses stop losses. When things turn, you don't have to be the first to get back in. See what maintains its strength. Then the markets put on the sorting hat, and sort the good from the bad. Then you have the opportunity to rebuild your portfolio in the image of whatever the market is on the other side.

What should investors keep in mind with the positive vaccine news? Don't discount the fact that global equity markets, including Canada, are in the throes of a cyclical bull market. Vaccine is great news for humanity and investors. Yet a number of investors remain nervous and are waiting to invest. You can outthink yourself sometimes. Don't do that. This is a primary bull market, and it's shaping up to be a good one.

Why are we in a long-term bull market? We just had an epic recession. Primary impulse of an economy is to grow. Coming off such a depressed base, we're back to growth. GDP in Canada of 40% annualized. If that isn't economic expansion, he doesn't know what is. It wasn't your garden-variety recession. It was artificially induced to reduce virus spread. We will get past the new waves. Corporate earnings will grow robustly in 2021 due to massive stimulus, which has also made household incomes resilient, so people are spending money.

View on telcos right now. Low beta, good yield. A defensive, work from home play. Some of the bloom may come off the work from home trade, and money may flow to more cyclical parts of the market. Telcos are respectable on income, but not so much on capital gain in the medium term. None of the telcos are making him jump up and down right now.

Gold stocks. He's bullish on gold. Sometimes it trades like a commodity (risk on), sometimes like a currency. The trend is your friend, even if you can't quite explain why, so respect the price action. Gold is undeniably in a cyclical bull market. Might be only at the middle innings of this trade. He plays it through FNV, the best way to get exposure to the commodity and exploration, while insulating yourself from financial and geopolitical risk.

Pent-up demand will be the next leg of this bull market. The next leg will start with vaccinations. Sectors to play: cruiselines, airlines, resorts, credit cards, Google (travel bookings) and oil--like Boeing, United Airlines, American Airlines, Wynn, Las Vegas Sands, Disney, AmEx, Chevron and Pioneer. However, Main Street businesses will go under and millions will lose their jobs, driven by record-breaking Covid numbers currently.

Vaccine news encouraging enough to be back into a long-term bull market? Pandemic triggered an unanticipated recession. Then the economy got reorganized and companies like Zoom took off. Now the rest of the economy has picked up. Confidence returned to investors in November. With the end in sight, the economy should be healthier next year. A lot of damage has been done especially to the small players. He's focused on healthcare, tech, and stocks focused on the reopening economy.

Further gains for media stocks and retailers that have managed to thrive during the pandemic? Absolutely. A change that was expected to take 8-10 years has been jammed into a month and a half. They're on a long-term growth path. The economy's moving in that direction and will continue to do so.

Any groups to avoid right now? A little suspect on commercial and retail real estate. Retailers have been hurt and may not recover. Cautious on financials, as the spread is so low. He's not avoiding financials, he just doesn't see a lot of upside.

Recommend any electric vehicle companies? Of course Tesla is way out in front. But mainstream auto makers are about to release products onto the market. One of his favourites is Linamar.