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

There are several big tech companies reporting this week and he is seeing a Disneyland for investors. Earnings growth is really good - the bar is high and set to go higher. Qualcomm and AMD blew away numbers. The Fed meets this week and a rate cut is expected, but listen to the commentary especially to forward guidance since markets are priced very richly. It looks like a thaw in US/China relations regarding rare earths. Tariffs are maybe not a big concern because they keep getting dialed back. 93% of goods are coming in under the free trade agreement. A rate cut is expected from the Bank of Canada and the forward commentary is dovish. CPI is still 3%.

The question as on the Canadian market. He doesn't think the TSX is overvalued. The growth of earnings per share is still rising for the TSX. As for gold its themes are overall instability, central bank buying and the US dollar. It is not related to supply and demand. At what point is the price of gold overdone - nobody knows. He wouldn't buy gold but would invest in the stocks. Maybe not now though since he thinks they are getting over-valued.

We know that the president is a petulant infant, and there's a long-established fact pattern that supports this. Today it's the Doug Ford/Ronald Reagan ad campaign. Next week it's the World Series. And you can bet dollars to doughnuts that there'll be something else the following week.

As investors, what we want to do is tune in to the signals that the market's giving us and tune out the noise. All this Trumpian sound and fury signifying nothing ... just turn it down or turn it off. Investors are learning that lesson, and markets are trading accordingly.

We've seen a good flurry of earnings out of the US -- about 20% of S&P 500 companies. Notably, we've seen the big money-centre banks, some of the regional banks, and some tech names (though we're waiting for most of the Mag 7 reporting next week).

Early indications from US banks are that things are looking good. Same for other sectors like consumer and industrial names. Just starting to get a trickle of results from Canadian companies. Expectations are high.

It looks pretty good going into year-end.

This is a really important budget (though we always say that). But this particular budget is one where the Canadian government really needs to meet the moment.

Seeing estimates from private-sector economists that are bracing investors to steel themselves for pretty big budget deficits, something in the order of $80-100B. These are levels of deficit we've really not seen outside of those couple of years of Covid.

He'll want to see some indication that the government is realizing efficiencies in the day-to-day business of running the government. There are ambitious plans to make commitments to fund the military and to support NATO. He's hopeful that we're going to see incentives to encourage private-sector investment, which is something Canada desperately needs to enhance our prosperity.

If we have an ambitious and well-thought-out budget, it could alleviate some of the pressure on the BOC to cut rates more aggressively. May shore up some support for the CAD as well; it's up YTD, but lagging all of its G10 peers against the USD.

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There are now leveraged single-stock exchange-traded funds (ETFs). There are leveraged ETFs where you are promised two or three times the return of some specified investment or index. You can buy ETFs that go up when the market goes down, or ones that go up if volatility increases.

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Markets are looking forward to the outcome. But we're seeing tensions elevating with US, China, and now Russia, and that will increase the volatility. Historically, the gold bugs like to see a little bit of chaos and global instability. That's what's partially driven the gold price to a record high earlier this week. Anytime you see moves like this in the market, it's normal to see a reversal later on.

If you're in the gold trade, nothing has fundamentally changed to derail that upward trend.

Does expect the year to end strongly. Political instability aside, we're seeing a lot of positives. There's a very strong monetary backdrop with interest rates coming down and inflation seemingly moderating. Also seeing fiscal expansion across many Western governments such as tax cuts in the US. In Canada, a record deficit is expected -- not always great over the long term, but in the short term that liquidity flows into the economy. 

Historically, when we see a strong first 3 quarters of the year it portends well for the fourth quarter (which is easily the strongest in any average year).

Those are the companies that are leading this market higher, and his team still sees it moving up. From the data centre side, we're hearing that leasing activity is accelerating. Some of the new models coming out continue to use more computes, which requires more chips and more data centres. Doesn't see anything derailing that over the next 3-6 months.

It's all about seeing the AI benefits eventually flow through to the corporate sector. We're hearing more and more positive data points on that every day. As adoption becomes a little more widespread, that's a whole new leg up for this trade.

It is always a concern. If there was going to be a repeat of the 2000 bubble, the data centre part is where you'd see that and then in semiconductors and right through the economy. 

But he's most focused on the use-case return on investment, and we're seeing that right across the spectrum. For example, BP credits its large oil discovery off the coast of Brazil to AI's helping them better target exploration. Shows how AI can have positive consequences for companies, and we're going to continue to see adoption increase over the next few years.

It's had a really big move. Now back to where it was at the beginning of the month. It felt good on the way up, but it's not quite as much fun on the way down. Volatility of gold has really picked up, so not surprising at this level to see these bigger movements. We need the volatility of gold to slow down a bit so we can determine where things are at. 

On the longer-term technicals of gold, this recent move barely shows up. That said, changes in the short term always lead to changes in the long term. In the last little bit, gold has gone parabolic and, with that, people piled in. Just took a little bit of downside momentum for people to want to lock in profits.

With the shutdown in the US, we haven't seen data on the commodities and futures exchanges to see what's going on with producers versus speculators of gold. Once that data gets updated, it'll be interesting to see the flow of funds.

He watches a number of technical indicators that provide a bit of warning that momentum or liquidity is starting to come out of the market. These indicators also chart the overall trend. So far, not seeing anything concerning. Trend appears to be intact.

We haven't really had much of a pullback. A pullback of 5% at a time doesn't really show up on these indicators. But something to always be prepared for and take advantage of it when it happens.

So, given that the indicators are still positive, he'd be looking to add on any pullback in any specific areas. 

His shop covers about 2600 companies in NA, and they rank them every day. The top is still dominated by gold stocks. Even though the price of gold fluctuates, the trend is still up. So gold companies can sell at the current price, though their costs haven't gone up (and may actually have gone down). Which means that their profitability continues to be really strong.

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