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Wednesday will see the first interest rate cut from the U.S. Fed. There's a lot of economic data already priced into the market. He wants to see what guidance is and he predicts a 25-point cut though some expect 50. We've seen a rotation from the FAANG into value, and the TSX has seen some of that. But if the economy is slowing, the TSX will lag, because Canada is lot more sensitive to interest rate activity than the U.S.
Good. Has a covered call overlay, holding financial services including lifecos, with an options strategy. It may have a little leverage, and a little more volatility but also a little more of a return. That said, if you're bullish on the underlying space, own the individual names for the long term. If you're short term or seek higher yields, then these products will generate higher, tax-efficient income, but will underperform long term. A rule of thumb.
Doesn't know if it will hit $3,000, but it's going higher. He's bullish, but it's had a tremendous run up and short term, gold is overbought. Buy any pullback and don't chase strength. Also, physical gold has already factored in rate cuts, so disappointment is more likely. He'd sell gold.
Real return bonds are challenging to the average investor. The distribution of these is low, plus the inflation rate. This asset class sometime anticipates inflation and prices it in, and if not, there's big downside risk. Take advantage if it underestimates inflation. Is also serious interest rate risk.
What's not to like, but how long will it last? Some say a few years, others we're near peak demand. Look at price: 50x PE and 35x forward PE, assuming it reaches growth projections. Eventually, this will normalize, but doesn't know when. He owns a little, but uses options.
Before each US Fed meeting, he looks at what's priced into the market and what are the street's expectations. George Soros said you make money by discounting the obvious (what's priced in) and bet on the unexpected. His data says that a Sept. cut has a 158% chance, no surprise. There's a two-thirds chance they cut 75, not 50 points. In the coming year, he's pricing in ten 25-point rate cuts (250 total). Last June, the FOMC indicated their median forecast for end-2025 was 5.1% vs. the market pricing in 5 cuts this year to 3.9%. So, the Fed must be aggressive in lowering outlook. If the Fed cuts more than they projected this and next year, it means the Fed is worried about the state of the US economy.
