A Comment -- General Comments From an Expert (A Commentary)
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Corporate and Government Bond ETFs. The older we get, the more fixed income we should have, but the yield has never been lower. Stagflation over the next decade will be bad for bonds. He prefers quality corporate over governments for the yield, but it is riskier.
Larry Berman CFA, CMT, CTAUnknown
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What to use as a hedge? He sells a call to pay for a put to provide protection over the whole portfolio.
Larry Berman CFA, CMT, CTAUnknown
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Educational Segment. The current profit margin forecasts do not support current market valuations. He has never been more bearish in his life. He is worried that the central banks in Europe literally have to print money to keep things going. Profit margins have far more to fall after a recession according to history.
Larry Berman CFA, CMT, CTAUnknown
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Market. This too shall pass. March was a panic period. We are going to come off the COVID lock-down and some sectors will be heavily beaten down that have great value. There will be opportunities to let some investments go that make no since in a post-COVID environment. The key is if investors will read through the horrific results from during lock-down. When it comes to an end, we could see a quick recovery of profitability; however some companies will not have handled it. Fixed income is going to be a large challenge. Capital will be pushed into the equity markets. Companies that have high return on equity and don’t need a lot of capital will be well positioned to grow. Cyclicals will do well too.
Darren SissonsUnknown
COMMENT
Market Outlook He likes that the government has stepped in during a time of crisis, but not it is time for transparency. Are taxes going up, will we see cuts in some programs? He thinks taxes will increase as it appears unavoidable at this point. Although Canada is a better financial situation than most countries and interest rates are low to service debt, higher taxes are about the only way to go. The recent market rally is discounting a good outcome of the March 23 lows. Twenty-five percent of the market cap is in five companies. He is shocked at how wide the breadth has been on the recovery. He thinks value is now coming in. He is using a barbell approach -- buying the big 5 and value stocks.
Gordon ReidUnknown
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Physical gold? People like gold as a hedge to their core holdings. It has worked reasonably well in the latest days. When he buys gold for client as a small holding of their asset mix, he would buy through an ETF. The thought of holding physical gold brings on the thought of Armageddon. You may not be able to deal with gold under that scenario -- you sure can't eat it! When it comes to owning gold producers, the correlation with gold prices is not great. A lot of those companies are not good at running their operations.
Gordon ReidUnknown
COMMENT
No, we won't return to March's lows, but investors must fall the situation carefully, like how restrictions are lifted and how consumer behaviour changes. The market got way ahead of itself in April-May, partially due to massive government stimulus, FOMO, vaccine hopes, etc. He's sitting on 10%, holding a lot of utilities and telecoms. This retracement from the rally is normal. Watch for Q2 results in July-August--we will really see the impact of this virus. There will likely remain little corporate guidance. He's cautious. Pick your sectors and individual companies carefully, not broad indices.
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Market. Companies don't have a lot of assets. Tech companies don't really make anything. We should have been more overweight tech. He is sticking with the big ones. Companies that have huge cash flows and terrific balance sheets are the ones who can tap the marketplace and take the business. It is not the dividend paying stocks that drove his returns over the last 10 years. At the moment China is not taking all our commodities. Teck has gone nowhere. He needs structural tailwinds for growth going forwards. BBD.B-T is coming out of the Blue Chip index, but this is only significant for one day for the stock price. However it never really recovered from 9/11.
Barry SchwartzUnknown
COMMENT
Market Outlook There have been two major rallies since the collapse. Stay at home stocks first, then some short covering. Stocks got over-bought and yesterday's pullback made sense to him. How can this market advance in a "V", when the economy will not, he ponders. The economies will re-open and central bank stimulus are a reasonable response and the market can rally. The biggest risk is if the Democrats should win the November election, they may make significant changes in corporate taxes. Stocks that are in the eye of the storm can become a real drain for investors. He does not want to play the airlines, cruise lines, and REITs right now -- maybe when the vaccine is developed.
Greg NewmanUnknown
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Market. He was more surprised with the rise up in the last month than the sell-off this week. We are not going to see a 'V' shaped recovery. It's going to take a lot longer. We will see more corrections to come than a relentless rally straight up. He is bullish on tech and the cloud over the next year or two. Cyber security, too. There is a big risk in a change in the US government that the market is not ready for and a second wave of COVID-19.
Larry Berman CFA, CMT, CTAUnknown
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Educational Segment. He is worried about guidance given by central banks. What they don't get is that the flat yield curve and negative interest rates is causing all kinds of missed allocations of capital. We should not need all these supports from central banks for economies to function. He fears that all the money printing in Canada is going have us go the way of Japan. Low interest rates are not bullish. It is a reason to be very concerned that the system we have build is very fragile.
Larry Berman CFA, CMT, CTAUnknown
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Market. Markets are overbought after the lows of March. It has been a pretty breathless and relentless rally. He would not be surprised to see a pullback or pause here but it should be understood that we are not going back to the depths of the March lows. There is unprecedented fiscal stimulus from the federal government. The primary driver of the buoyancy we have seen has been the rapid and coordinated and unprecedented response from governments and central bankers around the world. He thinks it is not likely that these will be withdrawn. This is just the sharpest and shortest recession of our lifetimes, not a depression. Trump will likely do whatever it takes to get re-elected and might play the China card. COVID-19 is no longer the primary risk to markets, but rather central banks stepping away, the election and the overbought nature of the markets are the primary risks.
Brian MaddenUnknown
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