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

BOC rate increase less than expected. Instead of 75 bps, it was 50. Still sees more hikes ahead, until inflation cools. Markets are doing well despite a pretty tough September. October is typically the "bear market killer" -- over 35% of the bear markets since 1950 ended in the month of October. Good seasonal patterns ahead. Looking at the uncertainty of mid-term elections, since 1950 we've never had a negative return in the 12 months after. Probably because it takes some uncertainty out of the market. In fact, the average return is about 14.7%. Historically, the best year for market returns is the 3rd year of a presidential cycle. He sees market headwinds turning into tailwinds at this point.

Hunting for a market bottom is like hunting for truffles. The best time to invest is when it's the most uncomfortable or unsettling.

Tech stocks. He's not one to just buy a stock and forget about it. He more actively identifies the type of sectors and industries that perform well. Right now, his weighting in tech and communications is quite low, under 10%. Tough to own tech stocks in a rising rate environment, given that they're high growth and long duration. Tech was the leader 8 years in a row, but he doesn't think it will be the leader for a while. Tech isn't his top choice, even if we get into the early part of the next cycle.

Consumer staples weighting. Defensives have been performing well for the better part of this year. We have to look ahead to where the economy will be in 6-12 months. Inflation will ease, and banks can become more dovish. He'd start to underweight consumer staples, and move into early cyclicals.

The CAD. Against the USD, the CAD has been range-bound between 70-80 cents since about 2015. BOC needs to follow through with trying to fight inflation, same as the Fed. It used to be that energy prices would command where the loonie would go, but it's different today. Canada's very tied to the housing market as well, and that could help explain weakness in the loonie.

Air travel. We're entering an environment where people are really examining their need for business travel. So it might be weaker, relative to where we were in the past. But perhaps leisure travel can make up for that, due to to pent-up demand.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Open Jobs per Unemployed Person. The labour market has been a thorn in the Federal Reserve’s side, as a historically low unemployment rate and high job openings have resulted in rising wage growth, contributing to persistently high inflation. This year has been all about economic data points, and rightfully so in the wake of persistently high inflation. There have been many economic releases that investors have kept a close eye on this year - Central Banks’ interest rate decisions, CPI prints, housing prices, GDP prints, and of particular interest in this market update, jobs data. The number of job openings in the US has ballooned since the trough in 2020 to a staggering total of 12 million open jobs earlier this year. At the time, this represented close to two available jobs per unemployed person.

Tech earnings have been brutal so far this week Tech has become a pariah this year. They used to have little competition, great growth and little economic sensitivity. No more. FAANG is no longer a secular growth story, but held hostage to the wider economy.

Educational Segment. Waiting to see if Bank of Canada will mirror U.S. Federal Reserve monetary pivot (pause on interest rate increases). Concern is that job losses are increasing in the USA and recession is coming. Will impact interest rates in Canada (bond prices). ZSP & ZUE highlight differences in investing strategies (currencies).

Fundamentally oil should be $100 a barrel and a price of $100 to $120 should be sustainable for 5 or 6 years. China's zero Covid policy and a potential recession may mean lower oil prices on the demand side but the supply side is important too. Global inventory has fallen the most in history and is still falling. We have had a massive draw-down of reserves, the biggest in history, and it is now ending. The EU embargo on Russian oil could impact Russian production. Also there is upcoming seasonal strength. He sees production growth peaking in 2024. There are record amounts of cash flow and debt is being paid down. Some companies have so much cash flow they can buy back all their stock in three years and therefore privatize. The headwinds should last no more than two months. He feels that at $180, oil will be too expensive to use for discretionary purposes. Next year should be a catalyst to re-rate stocks trading at near generational low valuations.

The question was on natural gas. He prefers to stay in oil one reason being you can't predict weather and temperature. Good gas names to own are ARC and TOU. Also Nuvista of which he is the second largest shareholder.

The question was on hedging. He is not in favour. The best hedge is a strong balance sheet. Bullish on oil so doesn't want to see capping.

He's sick of hearing that earnings are weak. Not true! Look at Bank of America, JNJ, Lockheed Martin, American Express or CSX last week. They reported beats. Earnings are sharply better than expected.

The USD according to technical analyst Carley Garner The US dollar hasn't broken $113.40 resistance, according to her data. Since the Russian invasion of Ukraine, the USD has surged, but it is the last asset to revert to the mean, but that is coming. The strong dollar has been albatross, weighing on US stocks. Garner sees the ISD return to pre-invasion levels, which would be spectacular for stocks. Meanwhile, she sees a perpetual bearish divergence from the relative strength index (RSI), and the RSI is hitting extremes now, so the USD is waning.