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COMMENT
Investors pricing in an end to the Fed tightening cycle. A bit premature. Nice rally off June lethargic lows, with growth stocks leading the recovery in the NASDAQ. Long bond yields have come down from the May peak, USD rolled over a bit, and gold dipped and then rallied. Cyclical stocks have lagged, which indicates to investors that the Fed is nearing the end of tightening. He hesitates to jump on that bandwagon here. Risk going forward. Fed must get inflation under control. Another 100 bps of tightening to go. Long way to go from 8% back down to 2%. Can't tell if we've seen the peak of inflation, though it seems we have. When Powell soothed nerves a couple of weeks ago, the market may have rallied too much.
Unknown
COMMENT
Sentiment indicators. He's neutral weight in stocks right now. BAC survey had the lowest confidence on record, high levels of cash. Largest gross short position ever. Lots of money is out of the market expecting a pullback. This gives him comfort that some of the bad news is in. Auto stocks, for example, have already priced in the next recession. We're not going to have a dramatic turndown, but they have to cool down economic growth. Don't rush out of stocks, as they've already taken a hit this year. He still hesitates to say we've hit bottom and we're starting a new bull market.
Unknown
BUY
Likes it here, despite the problems. Very well positioned for a recovery in the auto sector and the migration to EVs. Parts are similar to both segments. Low valuation.
Consumer Products
BUY
A compounder for grandkids? It still fits that legacy view. See his Top Picks. Numbers were good last week. Cloud services alone justify the valuation. Diversified investments. Massive cash balance, positive free cashflow, dominant in distribution. Comfortable owning at these levels.
specialty stores
WEAK BUY
All parts manufacturers have suffered due to supply chain issues. There will be a recovery. Well positioned for a move to EV. Attractive valuation. He'd pick MG, MRE, and LNR in that order.
transportation equip & components
BUY
All parts manufacturers have suffered due to supply chain issues. There will be a recovery. He'd pick MG, MRE, and LNR in that order.
metal fabricators
HOLD
No problem with the price. He's not rushing to buy the banks, he's underweight. Risk to earnings growth, mainly because slowing economy and capital markets will increase loan loss provisions. Dividends are still safe. Risk of large US acquisition, bought closer to the peak. Last week's sale of Schwab and purchase of Cowen made sense. He favours BNS and CM in Canada.
banks