Larry Berman CFA, CMT, CTA

Educational Segment. Year to date, almost $900B in new equity money has flown into ETFs and long-only equity funds. This surpasses the cumulative total of the last 19 years combined. Usually, the behaviour is very cyclical. When markets are doing well, money runs into them. After, they underperform. The rapid upswing in performance, looking at annual returns, could lead to weaker returns in the near future. The government has given money to people and this has flown into equity markets. This should add more volatility to markets in the next 3-4 months until we get more clarity about the variant. The money coming in is massive, and the question is how sticky it is.

Hedge against inflation. Inflation index bonds is the best way. However, for most people, not having any fixed income in a rising interest rate environment for most investors. Gold and gold equities should be protective too but in the last year, this has not panned out. Gold and gold equities are the cheapest asset classes. Market place views inflation as transitory. Likes silver more for its application in greening of the world now.

Steel and base metal stocks are an infrastructure play. They will be a good play into putting people back to work and major infrastructure plays.

You should not invest just for a high dividend. The tech sector in the late cycle where interest rates rise, will underperform. He is underweight technology. You want to see this pullback significantly before dipping in. The dividend is volatile and is driven by the premium from the underlying stock price.

Late in the cycle, healthcare tends to outperform and is less sensitive to volatility. If the broad markets pull back, he would wait for the uncertainty to be priced in more.

Loves semiconductors for the next few years. They are the engine of everything we do now in the digital world. If interest rates go up in the next 6 months, and feds pullback on aid, then semiconductors could pullback and underperform. He would lighten up and dip back when there is a pullback.

You get run ups and then disappointment. Probably investable but he is not sure if it will be a player in the future. This was the same case 20 years ago. It sounded imminent 20 years ago and this has not yet panned out.

A regulated utility. Need to think about interest rates sensitivity. Need to buy it at the right time. If rates go up, be underweight until interest rates peak out, near 2% to jump into utilities. Wouldn't sell but would not buy more.

Covid variant. Have seen some recovery but not broad based. We saw tech recover. There will be a big noise factor until we get more clarity on the variant. Markets should not like uncertainty. For the next couple weeks, should not be a buyer here. From a technical perspective, the price action from last week was damaging and there were reversal patterns. Need to test support levels of September lows and 200 MA before markets can rebound.

Debt ceiling. Suspects a new resolution on the budget and they will probably kick it down the road. Clear that it is difficult to pass new infrastructure and stimulus. This adds to the noise for the next few weeks and is not positive.

Berman's call was replaced with special coverage today.

US-China Summit. Tensions between China and the US has ramped up for a number of years. There is no shortage of Chinese policy criticism. China is determined to put it in a place of equality with the US. Taiwan is a big part of the geopolitical tension. He fears we will see escalation in Ukraine but Taiwan will probably be handled differently.

Russia's escalating pressure on Ukraine matters for Europe and their energy market. For the US, it matters less for their stock market. Most market players will take a similar path to when they annexed Crimea. This is not yet priced in.

Feds. There are some moves to replace the chair. Thinks Powell will keep his job. It depends on what kind of bills get done, and the relation with the more progressive part of the party. There will be some horse trading. We should find out in the next couple weeks who will get the Fed Chair position.

A hedged ETF will not have any impact on US assets since the currency is hedged. If inflation is more persistent, then the Fed will have to be more reactionary. This will cause an unexpected upward movement in interest rates, which will lead to these assets to underperform. Good strategy to extract yield from a sector with low yield. Not the best time to start a new position. Would trim some exposure.