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A Comment -- General Comments From an Expert (A Commentary)
COMMENT
San Francisco's Fed chair called for a slowdown in hiking interest rates The market is telling the Fed that it can't wait any longer to see the effect of their rate hikes is reducing inflation. Therefore, he expects the Fed will pause their rate hikes in November. You have to give the market a chance to catch its breath. We're seeing cracks in how to price fixed assets.
COMMENT
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Small Caps Tend to Lead Markets Higher. We are biased here as we have always focused on small- and mid-cap stocks, but small companies tend to lead the market higher in a recovery. And they are historically cheap. Right now, they are about as cheap as they’ve ever been versus large caps, because scared investors are paying more for the perceived safety of larger companies. Small caps tend to have purely domestic revenues, so you don’t have to worry about the war or recessions in China and Europe. Small caps tend to have clean balance sheets, since banks don’t want to lend them much money. Small caps tend to have higher insider ownership, so executives are highly motivated and aligned with shareholders. Unlock Premium - Try 5i Free
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Premium contentCOMMENT
COMMENT
Markets. Rally started last Thursday. Sentiment is washed out, investors are very negative. Pain trade may be a bit higher. People are comfortable that they have reduced their allocation. If you miss the first 20 days of a bull market, you're missing half the gains. Bad news is everyone's positioned for a recession and rates are going higher. Good news is we've gone through a lot of bad news that's been digested. As you go company by company, a lot of them have gotten very cheap. If you're underweight equities, a lot of these rallies will tease you, and you're going to wonder if the actual real recovery is happening. His personal call is no, it's not there yet. But we're going to have a powerful rally in the next few weeks that will cause some people to question and then chase. We're not at completely washed out levels, but we're certainly at levels where you can start picking away and getting some good value.
COMMENT
Risk that rising rates have yet to slow the economy? Yes. So far, the first part of the market fall has really been about valuation. But now, we're on the cusp of the earnings apocalypse. In the US, you're still seeing companies managing to grow and beat. The thinking is that it will be a Q1 or Q2 problem, and that may be the bottom. That could be true. It depends how sticky inflation is, and it has been sticky, and central banks are going higher.
COMMENT
Big tech. There used to be lots of arguments about the law of big numbers. Big companies still find ways to execute and to grow, no matter how big they are. Concerns about big tech stifling innovation has put a bull's-eye on them from government. You don't know what new policies are going to come in, and that is a concern for the sector. But at some point, these names get too cheap and it's time to step in.
COMMENT
RRSP to a RRIF. The goal remains the same: maintain capital as long as we can, try to grow it as long as we can. Names like PPL are going to help, with its wonderful growing dividend, good growth profile, and reasonable valuation. The government wants its money back. Withdrawals start fairly innocently around 5.5%, and get very aggressive as you get older.
COMMENT
Place for US cash? Many people say healthcare, because it's defensive, especially going into a recession. He sees better value in tech, as it's down 35%. NASDAQ may not be the best to own for the next 3 years. But over the next 50 years, this is the best thing to own, especially after the downdraft it's had.
COMMENT
Rally in November-December? It's really cute to call a rally here. We're in it right now, though we're having a tough tape today. If there are more up days in the market, people will be teased back in. We still haven't had the full reckoning in the market. We'll probably bottom Q1 or Q2. But we're at levels right now where it's very interesting to be picking away.
COMMENT
Change tactics from last decade? Over the last decade, main thing was being long tech and e-commerce plays. You just had to buy those companies and sit on them, and those companies did well. In 2021, those stocks were trading at crazy valuations. Now you want to be a stock picker, and not just buy the general market.
COMMENT
We're in for several quarters of choppiness? For sure. Especially the US indexes, which are dominated by the tech sector. Canada's a bit different. The tech area's under a bit of pressure, and we're going into a period of economic weakness. Tech does have some industrial aspects to it in terms of cyclicality. Starting to hear rumblings about weakness in AAPL and other enterprise software companies. People have been valuing these companies like they never, ever have troubles, and it's ominous for those sectors.
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