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Geopolitical Events

The question is should you play these things? If you a oriented to being a short-term trader, days to weeks, he has no issue on speculating around these geopolitical events. When there's a major event, you shouldn't ever really do anything radical to your portfolio like sell everything and go to cash. In the long run, that would really hurt you.

This current Iran-Israel conflict is a little bit different. He's brought in a graph of the US budget. At its peak in the 1980s (the Reagan years), military defense expense was 28% of GDP. During the Clinton years, a lot of money came out. The biggest line item in the US right now is social security. 

Trump says the US is done policing the world, and other nations are going to have to pay a bit more. Congress pushed back a bit on support for Ukraine, and he suspects they'll push back a bit more on more money for supporting Israel.

During the pandemic, defense spending dropped to its lowest share of federal spending. Since then, it's started to go up again. Could be a trend. Seeing a lot of this around the world, even here in Canada. Relative to the US, most countries' spending levels are pretty benign. 

The biggest thing here is the US deficit of $37T, and it's choking them. This "big, beautiful bill" is going to add to that. Money has to come out of the budget, and one of the areas could be military spending.

Look around the world at countries that spend the most in terms of military. North Korea is up at the top. What's interesting is that the Middle East and parts of Northern Africa are ramping up. He thinks this is for the protection of energy infrastructure in those parts of the world, and that's costing a lot more money.

When the Russia-Ukraine war started, all the excess oil that was going to Europe rebalanced over to Southeast Asia and Australia. So that part of the world doesn't want to see oil prices go up either.

If you want to make a trade and play the geopolitics of what's going on in the Middle East right now, and if oil prices are going to go up and persist, overweight oil drillers and energy names. XOP is an ETF that plays a broad number of oil drillers. Gold might be another one to tilt towards. We're not seeing a flight to safety in either the USD or US treasuries.

Don't sell everything and go to cash. Rebalance your portfolio or make some trades.

We are navigating short-term political shock. Oil is going up due to possible shortages and there are possible supply change issues. The Nasdaq is up this year with with cooling inflation and momentum in the U.S. markets. The TSX continues to outperform with strength in the gold and materials sector along with energy and industrials. The market is pricing in further rate cuts and she is cautious for some volatility, She is maintaining exposure to secular growth themes such as AI and Health. The stock market and economy can move in different directions.

It is a good value stock. It explores and develops conventional oil and gas. It is too volatile for them even though it outperformed the last quarter. You could trim back and wait for a more favourable price target. It is a mix of buy, hold and sell.

A note regarding shock events: Going back to the 1940's the average return after a shock event is up 7 1/2% 12 months later. She sees good growth with its powerful AI centres and increasing revenue. It is in the volatile tech space and trades at a premium of 60X earnings. It has long term contracts with revenue growth of 40% year over year. However she sees a downside price of 25% and there has been some insider selling.

Although she doesn't own it she has traded it. She is cautious on the run-up and AI sector but it could show good growth and there is still room to run in the sector. It scores 8 out of 10 fundamentally. There is a mix of buy and hold on the street and analysts see an upside of 12 to 13% in valuation. You could keep holding it but also do some trimming.

She likes the rails but would like to see more consistency in the quarterly reports and more momentum. The dividend is 2 1/2% which is not great. There is upside in the fundamentals and it should turn around for the long term. It scores 6 out of 10 on the value scale.

She has owned it in the past but not now. It is a wholesale business with premium food distribution.. It has been mostly under-performing for the past 5 years. Pays a 4.3% dividend. There is upside in the space.

She really likes it . It has done a good job of acquiring and managing niche companies in the vertical market business. Also organic growth has increased. Has strong free cash flow. Return on Capital is one of the best in the market. Scores 9 out of 10 on fundamentals.

It still holds a dominant position in world global payments and is still a long term hold with good execution. It trades at a bit of a premium.

It is one of the most integrated companies in U.S. health care. They thought it was very oversold so they doubled down on their position and will trend back. She is looking for 13 to 16% long term upside but doesn't consider it a buy and hold. Should be a high quality compounder.

It was very sold off so she bought it and sold in December for a 36 to 37% return and not a long hold time. It is now oversold even with the recent guidance cut. She doesn't like the discretionary space but there could be some upside.

It acquires and manages oil and gas royalties which is less risky than the actual production. Has a dividend of 5 1/2% with a forward dividend over 8%. There is no risk re a dividend cut. Scores 8 out of 10 fundamentally and 10 out of 10 on valuation.

It is buying back shares and did some cost cutting which could increase cash flow, but it still carries a lot of debt. It is a cyclical business and is battling U.S. giants. She wants to see a turn-around. If you own it continue to hold.

She owns it for the dividend of 5 1/2% and cash flow. Has a 90% payout ratio. It has renewed it's share buyback and increases its dividend. Pipelines are cash flow machines. She sees 15% per share growth in 2025. Fundamentally it scores 8 out of 10 and valuation 9 out of 10.

She likes the space but people are not investing in it. It has a low valuation and is tempting but she prefers elsewhere. It is a global leader in a crowded field. She sees 5% growth so there is some upside.