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

That Canadian manufacturing posted gains is surprising, but is probably just a result of the ebbs and flows of the economy. And there's the tariff issue affecting everything. 

In the US, technology makes sense. Financials also make a lot of sense in this environment. Likes industrials, they've been right at the top of the 11 sectors so far this year in terms of performance. Among the very diverse healthcare industries, you have to be selective; some names have been beaten up, others have held up quite well. 

He's being very selective in the Canadian market and somewhat cautious.

When you look at the US market, we're seeing about 8.5-9% YOY Q2 growth. That's more than expected. Good news. Technology continues to lead -- great reports from MSFT, NVDA, GOOG over the last month or so. About 81-82% of US companies so far this quarter have beaten earnings expectations. 

The word he'd use right now would be "resilient". 

It's all very challenging. News that comes out one day on tariffs can change the next. His team goes back to their quantitative methods, using the formulas they have to forecast expected earnings based on the numbers they have.

In his portfolio he has AMZN, AAPL, GOOG, and NVDA. Those are the names he favours. META screens well, but he doesn't own it because you can't have 90% of a portfolio in tech/Mag 7 names. MSFT always seems expensive.

TSLA is a different animal entirely, based on expensive valuation. Concerned about management and where management attention is at any given moment.

Right now WTI is $64 and 200-day MA is slowly moving down. Hard to predict. So much depends on OPEC+. Sentiment around economy still a bit uncertain, and that explains why oil prices have not really pushed higher.

Investing 101: Don't Buy Fads

Nearly every investor has been caught buying a fad that didn’t work out. Cannabis? Check. Electric vehicles? Check. Dot-com companies (for the older folks)? Check. When there is a fad that is attracting investor attention and money it is important not to get caught up. Yes, there are often good companies doing well, and that’s how the fad or bubble is created in the first place. But investors can focus on smaller companies and there are always promoters and brokers willing to extol the virtues of a sector or specific businesses. Stick to the fundamentals. Don’t pay 100 times sales for a tiny company just because it is in a ‘hot’ sector.
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Believes momentum will continue. What's holding us back are Donald Trump's tariffs, which are very specific. About 90% of goods are moving across the border tariff-free under USMCA. It's a very complicated setup. 

On the other hand, our economy's been "liberated" by turning on a big gas and a big oil export facility on the West Coast. These have pumped a lot of $$ into the Canadian economy. Gold production with the price rising has also added a lot.

The pessimism around Trump's noise has flattened the housing market. But we are going to get rate cuts, which should hopefully rekindle that market. Bruce's wife is in real estate, and so he's had feedback that housing is starting to pick up a bit.

The TACO part of Trump is coming through, and people are starting to ignore Trump and just get on with their lives. The outlook looks very good.

Canada has lots of technology expertise, so we're well-equipped for the AI revolution and will benefit from that.

Steel's been hurt badly because we're not a global leader. But for aluminum, we're a low-cost producer providing a large share of the world's supply. So for that we can export to other markets, though not make as much $$ as we do when products criss-cross the US border.

For Canadian energy, we're finally turning on exports to countries other than the US (who always paid us at a discount). So now that we'll get a better price, Canadian energy is probably in for a better run than the world is. Canada enabled Putin 20 years ago, because we wouldn't build pipelines and he did.

For the TSX, recent moves are probably not due to earnings. The tariffs were a bit of a wakeup call. The headlines are pretty scary, but things may not be as bad as they looked at first blush. When you really look into it, MUSCA is still in place and protects about 85-90% of the trade we do with the US. 

Canada also has agency to start looking at better trade relations with Europe and Asia. We started shipping our LNG. He's actually fairly bullish on Canada.

They're kind of hurting themselves with these tariffs. He doesn't see the point of them. Lots of bluster and politics. Thinks there's enough pressure that tariffs won't be implemented in a meaningful way, and that's the optimistic part.

The pessimistic part is that he's concerned that maybe some of these tariffs will be worse. Some of the jobs data was pretty weak. That could be a leading indicator that the economy might be slowing down a bit.

Earnings have been coming in pretty strong, especially in tech and consumer discretionary. Some of the other areas haven't been as good. Healthcare keeps struggling.

Tariffs are still the #1 thing. He's never had to analyze so much politics in his life, and he's been doing this for quite a while. He'd like to see the rhetoric abate and actual deals get done. That would uncover the true impact. He'd also like to see the jobs data get a bit stronger.

There is an opening to lower interest rates now, as the latest jobs data gave the Fed a bit of a green light. Lower interest rates would mitigate tariffs somewhat.

His firm's approach is first as a fundamental/quant shop, and to look at the story after that. Their strength is in unwinding the accounting and financials.

The grid itself isn't built up enough regardless. Buildout of data centres is huge, representing a whole other layer of energy that we're going to need. 

There are a number of attractive companies that are involved in electrification, building the data centres, etc. ETN is one example, as is VRT. HVAC is integral, as these centres need to be kept cool. We saw META do a huge deal with CEG, which is unusual but shows how big the area is going to be. Stay away from the speculative companies.

Nuclear is also bubbling up. We're behind on supplying energy needs for this area, and that's why uranium stocks have been doing really well. He hasn't been able to find just the right opportunity to put money to work in the segment, but there are opportunities. CCO is a nice company, but doesn't screen particularly well. Investors have bid up the stock, as that's where the future looks to be heading. Engineering firms also play into the theme. EME is an example. 

Another beneficiary is AVGO. They don't make the chips that do the calculations, but the chips that move the data. Its stock's been doing phenomenally well, and that's all about the data centre buildout. MRVL also makes chips that move data.

Investing 101: If it sounds too good to be true, it could yield trouble

We have been watching with interest this year’s obsession with very-high-yield exchange-traded funds (ETFs). There are products out there, such as YieldMax MSTR Option Income Strategy ETF (symbol MSTY), that have an indicated yield of — wait for it — 72.91 per cent. This ETF uses a synthetic option strategy on a single stock, MicroStrategy Inc. to enhance yield, which is paid out to unitholders. MicroStrategy is among the largest corporate holders of bitcoin right now, and with bitcoin’s rally, the stock has done very well. But even with such a high yield the units of MSTY are down more than 20 per cent this year. ETF owners, attracted by the giant income, still haven’t made any real money, even though MicroStrategy stock itself is up about 36 per cent so far this year. Yet, this has not stopped investors from pouring money into the ETF, now at about US$5.6 billion in assets. And this is just one example. There are now many dozens of such super-high yielding ETFs. We think investors need to be careful here. In addition to getting seduced by high yields, investors could be in trouble in a different type of market, or if the derivative market seizes up, as it has done before.
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