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

Time to pardon Jay Powell. He's not a criminal. Powell says that Trump is putting him under criminal investigation for not cutting interest rates fast enough--and he has a point. If this is such a big deal, why didn't the stock market react today? Wall Street is betting that the prosecution won't happen. Even Republican senators are pushing back against the prosecution. Besides, Powell's term ends in 4 months. Also, Trump usually changes his mind, such as last spring's tariffs. To prosecute Powell would end the independence of the Fed Chair--not good. Secondly, Trump wants credit card companies from charging more than 10% interest. Congress needs to pass that law. Again, Wall Street doesn't care, because the threat is too over the top. The bank stocks fell in the morning, then rallied later. If Trump gets his way, he's only mandating a crash where these companies stop lending.

There is no surprise that gold is rallying with the geo-political risks and a stimulative US budget along with an increase in defense spending. So there should be a continuation of what we had in 2025. If deficit spending continues along with the other factors we will see inflation pressure. One of the benefits of increased spending on defense, etc. is for the banks, since spending will move through the system. We are not going to see a lot of nonperforming loans. The wealth effect should see some capital investment, capital goods, and infrastructure plans. The US mid-terms will be in November next year and if Trump loses he will be lame duck president. Tariffs will remain status quo for Canada and he is surprised the market is up as much as it was last year in the face of these tariffs.

At this point, no reason for concern. More important to him was that the street was expecting a decline of about 5k jobs, and we got an increase of about 8k. That's pretty good for Canada, a nice solid beat. A slowdown was expected, as the previous few months had been so strong. So to even keep the party going at all was a good thing.

Unless something changes, he feels that at this point in time everybody has had time to respond to the tariffs already put in place. Negotiations continue. As long as there aren't any negative surprises, it seems as though people have gotten used to them and are moving forward.

Over time we may see some of the sanctions start to come off. Some of the flows may start to change regarding who they sell to and where. What's intriguing is that on the first couple of days we saw a bit of softness in oil prices. With prices hanging around in the $50s, maybe we've seen a lot of that priced in already. Even with a pending war with Venezuela, the price never really did much.

In the last couple of days it's been interesting to see the price of crude slowly starting to creep back up again. At this point in the market in terms of supply and demand, we just don't know the outlook. But overall, it suggests to him that underlying demand seems to be fairly stable. Unlike natural gas, which is getting knocked all over the place.

Right now, we've seen that a lot of the uncertainties out there are still there. Nothing has really changed with that. It remains to be seen if the US dollar has finally bottomed out, or if it's going to continue declining as it did last year. It may not have the worst year since 1973 again, but it still seems to be fairly soft.

Gold and silver had a huge run, especially silver -- once it broke through $35, it just soared. We probably won't see something like that again, but at this point they still look to be in a favourable trend. We may see more moderate action, or corrections, or periods of consolidation. 

Overall, the underlying environment for precious metals still seems to be positive -- but the bar is set pretty high in terms of trying to beat last year.

For most of the last 6 months, his RSI rankings for metals and materials were dominated by the gold producers. Late last year we saw the silver producers take off. Now a lot of the base metal names are starting to climb up the rankings as well.

Often hard to tell if you're looking at a correction within an ongoing trend, or if the trend is ending. Usually the end is demonstrated by support failures. So something hits a new high, corrects, comes back, but doesn't get back to that high. You starts seeing lower highs and lower lows. Areas of support on the chart fail. Longer-term moving averages, such as the 150-day or 200-day, start to fall apart.

It's usually not just one thing but, rather, a series of breakdowns and failed rebounds.

At this time of year, stock trading tends to slow down. It's hard to read much into trading over the holiday weeks. Everyone's back this week, but just getting into the swing of things. People are rebalancing their portfolios, making changes, doing tax-loss selling. It's generally a time of thinner trading, which exaggerates the trades.

He's seeing natural gas as more seasonal, as the beautiful weather we're seeing outside today has crushed nat gas prices. When it gets cold again, price should go up. It's said that the main driver of natural gas is how people feel when they open their windows in Chicago ;)

At his firm, as long as something is showing relative strength and that it's attracting capital, they're fine with buying high and selling higher. That's actually what they try to do -- buy things that are showing strength. They realize they'll never get the top or the bottom, but want to capture as much of an upward trend as they can. "The trend is your friend till it ends."

His firm focuses mainly on a stock's price and its relative strength. 

First they ask if the market is favourable for equities? Yes. 
Which equities? Canadian and international have been outperforming US equities. 
Then they look at sectors to see which are outperforming? Drug companies, for example, are starting to outperform. Of the drug companies, which ones are showing the highest relative strength?

That's how they work through their process.

After 3 strong years of the S&P 500, and a solid showing from the TSX this past year, it will really be about monetary policy. We assume that we're going to have a new Fed chair, which is dovish. Leading up to that we may have some volatility. Speaking of volatility, we have the renegotiation of the USMCA, midterm elections (which tend to be the most volatile years and with the highest drawdowns). 

Everything underneath that is fairly supportive. There's an expectation of about 14% earnings growth for the S&P 500, which is positive. Inflation is easing, and that also supports a more accommodative monetary policy which, in turn, is constructive for stocks.

Absolutely. Valuations are higher right now. So it's more about the earnings results and the earnings guidance rather than the narratives around many companies (including tech companies).