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

Three big reasons.

Firstly, systemic increases owing to LNG capacity both in Canada and in the US. Secondly, increase in power demand in areas where data centres are being built out. For example in Texas, power demand is up 5.5%; for the past few decades, US power demand was growing about 0.4%. Finally (and thankfully), winter has finally arrived. We've had the coldest December in 10 years, and the forecast is for at least normal seasonal weather.

Broadly speaking, natural gas has gone from being a bridge fuel (to some future where we were going to live off solar panels and windmills) to being a foundational fuel. GE Vernova (makes gas turbines) reported this morning and spoke to clear, visible growth into the 2030s, and it's all going to come from natural gas.

Market sentiment is crappy, but you want that to invest. People are really fearful. Will tariffs be repealed? Now, we're in a pause before the rally resumes. Corporate earnings aren't too bad. Sentiment is negative. So, a good time to start investing. Technology, energy and small caps look good. Also, biotechs and financials. International markets are perking up, like Europe.

He prefers gold. They call silver the "widowmaker". It's up nearly 100% this year, a big move. Silver has commercial application in AI and aerospace. The trend is up. Gold and silver enter seasonal strength now. To follow gold, watch the biggest silver companies like First Majestic.

He expects the Bank of Canada to hold rates this week due to strong Canadian labour numbers. It's expected that the bank will hike rates late in 2026. The US Fed will likely cut rates slowly, perhaps catching up to the Bank of Canada. Powell will move rates according to economic data. Likely, the Fed will have a hawkish cut where they signal a slower path forward. A larger question: Will the Fed lose its independence under the thumb of Trump. He hopes not.

Bonds. He was shocked by the bond market reaction to strong Canadian job numbers last week. The market is pricing in a rate hike; bond ETFs sharply went down after that jobs data. The XBB has returned only 1.86% annually since end-2014, bad relative to inflation. Corporate bonds offer more yield, but also more risk; XCB-T returns 2.79% annually, barely keeping up with inflation. Both bonds and equities look challenged looking forward, so investors need to look at private markets to generate returns. As for passive vs. active ETFs, most active funds don't deviate from the index, but charge active fees. Stick with passive funds.

After the April draw-down in 2025 the U.S. budget was very stimulative. We can continue to expect a stimulative budget because of the US midterms next November and the US president will want the incumbent party to remain entrenched, so the US will be a big driver. Defense spending is a consideration. The crypto guys might be a bit disappointed. In Canada gold stocks have surprised and he thinks precious metals and gold will move much higher again, although money may start to move from gold to the Magnificent 7. As to the AI trade, to him it has the look and smell of the 2000.com era. He feels that AI is just a chip processing story with a lot of hype to it. There  are billions in opportunity in AI beyond semis. There is an overbuild for network and energy. How much money will be redundant. Also where are the AI opportunities in the discovery market and in prevention/security.

The question was on the Indian market. The outsourcing companies look quite interesting including the generic drug market. Not everyone has the ability to buy in the Indian market since you have to have a license. However some stocks can be bought in the US.

He's not sure if we'll see higher rates since there are some challenges and the economy is quite weak. So why would we not see lower rates which is not good for the financial sector. Inflation data is very important. We could see some recovery in the logistic space and the consumer segment, especially luxury items.

We've underperformed for so many years. The TSX is pretty lumpy, so there will be times when we actually outperform, which is great.

Performance is explained by our concentration in gold, metals, copper, banks & financials (which have done extraordinarily recently, with great earnings). There's also natural gas, which is finally in a bull market after years of slumber. 

Lots of tailwinds with these Canadian nation-building projects, which can be pretty stimulative and have a multiplier effect. We have a lot of power companies as well; so far they've been stable places to be, but are now fueling the buildout of the data centre push. Investors are getting pretty excited.

Put it all together, and the TSX has been just stunning.

It was a very scary, rocky year. April saw the administration announcing a financial reorganization that would right the ship from benefiting Wall Street investors for the last 40 years to benefitting Main Street instead.

CUSMA covers about 93% of goods that flow over the border. Trump toned down a lot of the tariff rhetoric to a point where he could, perhaps, claim a victory. Goods are still going through and there haven't been too many higher costs for Canadians, who haven't really seen that much inflation.

Canadian economy has been solid, and we just got more evidence of that today.

That's fine. They're all good, and they take turns at being the leader. As an asset manager, he always tries to figure out which one is cheaper than the rest. There's a truism that banks just go up over time -- they kind of do, but not in a straight line. And remember what happened to some of the world's biggest banks in the US 15 years ago.

Awesome question. He has a whole bunch. The magic words in investing are "all things being equal" -- assumes the news on a name and on the macro are the same in January as today.

#1 would probably be Telus. BCE is also in there. Names like AC, MFI, PRL, GSY, WFG, and TFII. All of these stocks are cheaper than they ought to be. If you want to take some real risk, look at DND or NFI (but that's a whole separate risk category). All things being equal, those names should be higher in January than they are now.

Don't do stop losses for stocks like KEY or GEI. If you don't have conviction in a stock, you don't want to own it. If it goes down 10-15% (which is very unusual), or even 30%, it doesn't mean the news flow has changed for a good stock. Instead, follow what you own -- if you don't like what you're seeing, start paring it back from a conviction rate of 8/10, to 7/10, to 6/10, etc. Don't get snapped out by the market.

Stop losses sound really good, like an elixir. But you get stopped out, and then the stock starts to come back. When do you get back in? You get in and get stopped out again. They do so much harm. If you're going to trade leveraged futures, such as oil or bitcoin, then you can use stop losses. But not for good companies that are paying you 6-7% to wait.

She wishes she had just a fraction of the optimism that the market has. She'd almost say that it's blind optimism. We're back into this "good news is good news, and bad news is also good news". 

Yesterday there was the ADP payrolls report, which was pretty bad. What did the market do? It rallied, because "hurray, we're going to get a rate cut next week". Today jobless claims fell, and that was good because the market said "hurray, the economy's actually doing OK -- we're not losing jobs, we're just not adding them".

She's been saying this for over a year, but at this point the market's disconnected to the economic fundamentals. That gap keeps widening, yet the market's just looking for any opportunity to grasp that optimism and keep it going as long as possible.

After the government shutdown, we started to see some economic data roll out. The first jobs report that came out was actually positive. The market got jittery because it worried that there wouldn't be a rate cut in December. Right now the market is so dependent on a rate cut, that's what's driving the market rather than the fundamentals. A cut next week is priced in. Her question is, what happens after that?
 
In Canada we've been consistently cutting rates for the past year, but it hasn't necessarily helped our economy. Just because the Fed Reserve is cutting rates, that's not the saving grace that will save the economy from a recession. It will be a part of it as rate cuts try to stimulate the economy, but it's not the be all and end all.