Market Commentary — Page 502

Market Commentary

COMMENT

Time to switch from tech to value? The script for a recovery centres on financials, industrials, and cyclical tech. Tech is expensive, financials are inexpensive, with industrials in between. Lots more to go in financials and industrials. Likes Magna, Finning and Methanex in industrials. Likes banks, insurance companies and US banks. Good to see some consolidation in tech. Amazon, Tesla, and Google still make sense on price to growth, and he's waiting for those to get cheaper.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Another meltdown like we saw in March is very unlikely. There is stability in the presidency, more stimulus coming, low rates and earnings have been good. Many companies have prospered even in a pandemic. A split congress is also good for markets. Volatility is expected to a certain degree as investors adjust positions, take profits and rotate sectors. Unlock Premium - Try 5i Free

COMMENT

It's a win-win situation: you can buy the Covid as well as the recovery stocks. Both classes have seen pullbacks recently. Stay long on everything. HOWEVER, U.S. Covid cases are rising alarmingly; we're in the middle of a contested election; and there's no stimulus package yet. Too many Americans refuse to wear masks. Investors and Americans are being cavalier. These are potential dark clouds that investors must be aware of. Wouldn't hurt to raise cash.

COMMENT

If I have $2-3K to invest, what to buy? If you have under $10,000 to invest, then buy an S&P index fund. Makes sure it charges a low MER. (He didn't name a particular ETF.)

COMMENT

cap rate: For the last 2-3 years, the average cap rate in the US real estate was 5.5% vs. the 2.7% US treasury rate (3-year average). And now the latter has fallen to 90 basis points, so the cap rate is even more attractive. Apartments: The effect of record low interest rates is huge; financing rates for Canadian apartments in the last 6 months have fallen 100 basis points. Meanwhile, we're seeing record low cap rates in midtown Toronto. Retail: pre-Covid, e-commerce sales were already taking away from brick-and-mortar. Today, how can traditional retail survive? Be careful what retail REITs you buy. Office space: before Covid, businesses were already using less office space and will continue to be challenged even during the recovery. He sees less demand in the medium term.

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Coronavirus vaccine. He's not surprised with the euphoric reaction to a promising coronavirus vaccine. He's surprised with the efficacy rate which is at 90%. It's a big breakthrough. There is some logistical challenges with distribution, but clearly it is great news. The stay at home stocks are selling off, and stocks beaten down are recovering.

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U.S. Dollar Weakness. Overall, the combination of economic and fiscal policies globally should mean that the US dollar softens compared to the Euro and emerging market currency. The Canadian dollar has strengthened off improved energy prices. A sustained rally in Canadian dollar is not likely.

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Importance of technical analysis. Both fundamentals and technical analysis are important. It's not one or the other. If valuation doesn't matter and you are trading chart patterns, it is the market for it. There is momentum and volatility.

COMMENT

Educational Segment. Gold remains one of his favourite sector. Looking at Barrick Gold, the median price target for the US fund is 34.52, which is around 30% upside. The reason they are not priced at higher valuation today is because of the gold price forecast. Gold remains attractive when thinking about central banks monetizing debt to keep interest rates low. The correlation between real yields and gold is very high. Some short-term volatility but a long term opportunity.

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Market. He wrote that there was going to be a spectacular upside in the markets following an announcement of a COVID19 vaccine and then it happened the next morning. It is very positive and let's hope it works as well as Pfizer is saying. Hospitality, airlines and real-estate have been the most battered sectors from the pandemic. Anything can go wrong. When the airlines get going again it is going to be very positive for oil. He wants to look at it more carefully. He has never been a fan of gold. He is not a gold bug.

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Bank covered calls when they go out of the money. It depends on what the banks are doing. If banks are falling he will buy back the call and sell closer. If it is rising, he will buy it back and ride the stock itself. You have to be very nimble and know what you are up to.

BUY

Total return ETFs work on the basis that there are no distributions being paid. To do the swaps they have to have counter parties. He does not see a lot of risk with the counter parties, however. He does not see a tax risk, or a counter party risk. Horizon have a good piece they can send to you on the structure of these ETFs.

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Horizons Total return product vs. a Vanguard product. It is a case of whether you want taxable distributions or not. He tends to use Vanguard because most of his clients are older and want distributions.

SELL

Bond ETFs, Canada and US – Buy, Sell or Hold? When COVID came up he sold all of his bond ETFs and has not budged since. Now the returns are so meager that he is not buying them.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Markets look forward and the “stay at home” stocks will be vulnerable to profit taking. 5i recommends to not chase the big sector movers nor sell the prior winners right now. Gold is expected to bounce around since the insurance premium is less valued today. The Feds will probably continue to support stimulus and keeping rates low. Unlock Premium - Try 5i Free

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Summer Sale

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

Time to switch from tech to value?(A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. (A Commentary)

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

If I have $2-3K to invest, what to buy?(A Commentary)

cap rate:(A Commentary)

Coronavirus vaccine.(A Commentary)

U.S. Dollar Weakness.(A Commentary)

Importance of technical analysis.(A Commentary)

Educational Segment. (A Commentary)

Market. (A Commentary)

Bank covered calls when they go out of the money. (A Commentary)

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

Horizons Total return product vs. a Vanguard product. (A Commentary)

Bond ETFs, Canada and US – Buy, Sell or Hold? (A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research.(A Commentary)

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