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

Still great momentum and great growth in many of the tech and communication companies out there. His team also likes healthcare and financials. Industrials also have a path to outperformance.
 
Technology and communications performed very well last year. But if you look at the Mag 7, not all of them did very well -- only a couple of them outperformed the S&P 500. We're shifting a bit more to the industrials and the financials. Probably not lowering the weighting in technology, as it still has a path to perform well. But we'll have more volatility this year, and it'll hit the higher-beta type of sectors such as technology.

Historically, some of the trepidation about a change in government does lead to greater drawdowns in midterm election years. Those years tend to be weaker, same as with the presidential cycle. 

However, volatility can lead to opportunities to buy things that have gotten a bit cheaper. Same as we saw last April with "Liberation Day".

Depends on size of portfolio and how much diversification an investor needs.

His team is still pretty constructive on the markets. They've been long the tech sector for the last 5-10 years, and think that still has a great outlook. AI will continue to flow into the enterprise market. Tech is a huge part of the S&P 500, so that should continue to do well. 

Tech's had a great run over the last 3 years, and we're now in the digestion phase where multiples are starting to level out after having expanded. We're going to need to see further earnings growth and further EPS revisions for a lot of these companies moving forward.

The Russell's seeing a rebound in more of the "real economy" companies such as auto stocks and equipment rental companies. That turnaround will continue to push the market higher. For the real economy, interest rates are lower and that's helping. From 2021-2022, ahead of the inflation spike, there was a huge surge from stimulus by governments around the world. We got ahead of ourselves in terms of inventories in lots of areas, and we have to work through that.

He has some exposure to metals and materials -- great performers last year, and expects that to continue. 

Still shying away from consumer staples whether it's personal care or alcohol. Multiples in the sector have come down a ton. Sees a lot of headwinds that are structural in nature. Pricing power is non-existent, lower-end consumers are moving to private label. The digital economy has taken away a lot of the shelf space that companies used to have, and there are now a lot more options. 

Likes the space. Most are trading at discounts to NAV, which now properly reflect current interest rates. Balance sheets also reflect current interest rates. In 2022 a lot of them had to refinance their debt, going from 1-2% to 5%. That was a big headwind on their interest expense.

He doesn't expect the same returns in 2026 as in 2025 or for the last 3 years, which averaged 23% annually vs. the historic 8-9%. Tech will remain his largest sector as well as on the S&P; the fundamentals are strong and growth is tremendous. This isn't speculative. He's fully invested and slightly overweight tech. He also favours materials, especially gold, which is a hedge against inflation and the go-to when there's geopolitical risk. Gold stocks remain very cheap with good cash flow. There isn't over-mining and margins remain good.

While the US extricated Maduro and his wife, the government of Venezuela hasn't particularly changed. The people around Maduro still control the mechanism of the state, and they still control many local and regional governments. To suggest that regime change has occurred is probably premature. Not saying that the US can't cause this to occur, but the process of asserting US control in Venezuela, if it's going to progress, has just started. People need to pay attention to that.

There's zero doubt that if the US were to get control of the reins of power in Venezuela, that could begin to change the dynamic of the world oil market. That would impact Canada over time as the Canadian heavy sour crudes, the Athabasca oil sands as an example, compete directly with some of the Venezuelan crudes. In fact, it was Venezuelan and Mexican heavy sour crudes that fueled the US Gulf Coast refining business and led to such demand for Canadian crudes.

Also worth noting that there are substantial opportunities in conventional oil & gas in the Maracaibo Basin precisely because Venezuela hasn't elected to make sustaining capital investments or new project investments. That could open up opportunities for North American companies, but would also present challenges for incumbent producers in other parts of the world, including Canada and the US Gulf Coast.

That's above his pay grade ;)  It'll depend on whether the US has the ability to really effect regime and political change in Venezuela, and how much social turmoil the US encounters from Maduro's hold on at least the poorer elements of Venezuelan society. 

Note that between 6-8 million Venezuelans fled the country over the last 20 years. So some of the groundswell of support that the US may be counting on is a groundswell of support that now resides in Texas, Colombia, or Panama.

It depends on what your portfolio looks like. If you're already stocked up on gold stocks, it absolutely might be prudent to wait before you add to your positions. If you don't have positions in physical gold and gold stocks, the writing is on the wall and he'd average in for portfolio protection starting now.

His outlook globally is pretty good, but in Canada is a little less good. Despite pronouncements to the contrary, it seems the prime minister doesn't like Canada's most efficient industry. When the prime minister says that all financial decisions will be made in the context of carbon, he's speaking loud and clear.

Until we get some clarity that Canada wants to do something that it does very well, you need to be a bit concerned about the outlook for Canadian oil and gas.

That said, Canadian O&G equities are so cheap that they've over-discounted the hostility of the political class to Canada's best industry. 

We've had 3 years of pretty strong markets as a whole. So investors should take a step back and say that earning 15-20% per year is not the normal pace of things. Things tend to be slower than that.  

That said, when you have healthy markets they tend to broaden out beyond a handful of stocks. We haven't seen that on the first day of trading today, but there are still 364 more days to go. He expects the AI beneficiaries to see more downstream spending into the more industrial companies and other technology. Being able to adopt those things should uplift more stock prices than just the usual suspects.

What's funny is that there's no such thing as a true "normal" anymore. Back in the day, normal was a good old-fashioned recession. Back in 2008-2009, there was a credit cycle -- we careened from peak to valley and back and forth.

We're likely to see more of the new normal that we've been in for the past 15 years. What you do want is strong, robust markets that have durability. For that, you need to not have every conversation starting and ending with NVDA. Thinks we'll see more of that this year.

There are so many ways to approach this. But the first step is to update your prior set of facts. Just because you've been drinking Coca-Cola for 10 or 50 years, doesn't mean it's the best company right here, right now. You need to reset and draw a blank page. What are the facts before us today? Critical to focus on what the future of a company looks like.

The past is the past. That's important, and the reason it's important is that we're seeing technological evolution at a faster pace than ever before. We're moving faster than the adoption of the internet and the trend of globalization.

The most interesting geography right now is Europe, primarily on valuation. He doesn't love banks today, but this is the best place to be looking if you do.