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

Is very bullish on Canadian energy (oil & gas) due to false narrative that world is able to move beyond conventional energy overnight. Increasing energy requirements from both developed, and developing world will require more energy (traditional & renewable). Government policies are undermining transition to renewable energy, and actually increasing reliance on oil & gas.

The 10-year yield peaked on June 14, the day before the stock market bottomed--not a coincidence. That yield is now ripping higher and heading to where the 2-year yield already is. When that happened before, markets were even worse. So, when these yield meet again, will the market tolerate it better. Possibly. That's the number-one thing to watch.

Stocks will be rangebound and earnings will come down. PMI, consumer confidence and declining gas prices will buoy companies to some degree. The market isn't as bas as it looks or is.

We've seen the lows for the year, but he expects volatility ahead. More data needs to come out. But employment is very important to the Fed.

Today's higher than expected unemployment number It's a Goldilocks report. He see a 50-bais point hike in September, 25 in November and 25 in December to reach a soft landing (no recession). But the crucial data is the inflation (CPI) on Sept. 13--that will move the needle even more than this report. You want to see labour participation rise, but wage growth lower than expectations. Remember, September is the toughest month of the year, traditionally negative.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. The markets have slid over the past few weeks as the Federal Reserve made it clear that the job to squash inflation is not yet done. The US dollar has continued its strength as an energy crisis in Europe carries on, and global growth begins to slow. Both Canadian and US bank stocks are reporting weak results on the back of falling bond prices and the declining capital markets of 2022. The markets have endured severe volatility, and the reasons for this volatility may be warranted with unprecedented velocity in Central Bank rate hikes, quantitative tightening, and decade-high inflation. Nonetheless, we see a land of opportunity up ahead as nothing ever stays the same, and this too shall pass.

Fourth straight day of decline in equities. Rally that started after the rout in June is looking more like a bear market rally, unfortunately. We've rolled over and are at least likely to test the lows. Sparked by the Fed. Notion of a pivot was taken off the table. Fed is going to raise rates and hold them there for a time, which has changed the narrative on stocks. Bond market wasn't all that fussed about it, until the last couple of days.

Stagflation. Where inflation is high and sticky, but growth is slowing. Q2 earnings reports didn't show a big degradation in earnings. But the challenge is the outlook is getting worse, and guidance and analysts' estimates are starting to materially decrease. The one good August CPI print at 8.5% came down only because of energy, which is pretty volatile and already seems to be on its way back up. Inflation could just as easily reverse the other way. Stagflation is a very tough environment for equities.

Timeline of a downturn. If we're going into a typical recession, which seems more likely, earnings could decline by 15%, and it takes 18 months for that recession to run its course. Stocks start to discount the end of the recession 6 months earlier. Spring/summer next year could see the market finding a bottom.

Factors for picking stocks. Positive momentum, reasonable valuation, lower volatility or stable. He doesn't have buy or sell targets. It's a matter of is the stock starting a new uptrend, and is it cheap enough? He never picks a bottom or top. He wants cheap, rising, and stable.

Canadian bank earnings. Rougher earnings session for the banks, and some of them came off pretty hard. For the banks, it depends on your thinking. He tends to be more medium-term, so trends do matter. Longer term, banks are fantastic businesses, and an oligopoly in Canada. Depends on what your timeline is. In retirement, you may not want to hold for 10+ years, and you may want to pause until we get some resolution on the economic outlook and the yield curve starts to steepen again. Rising rates is theoretically good for banks, as they can charge higher interest, but they have to fund that at well. The other challenge is trading and investment banking has really suffered. Worst year for IPOs in 35 years, plus economic slowdown has caused these areas to dry up. He's neutral until we get clarity on the economy.

Covering shorts. A stock can attract a short if it has mediocre value, negative trend, negative volatility. Until one of those things changes, a stock will stay on the short side. A trigger would be if a stock declines over 40% in a 6-month window, as then it becomes too dangerous to stay short. Or if the cost to borrow it goes above 10% a year, which is a sign that too many people are shorting a stock. Those types of stocks can become meme stocks or get caught up in a junk rally like the one in July.

Energy sector in the current environment. Energy companies are typically cyclical, mainly because of debt on the balance sheet. When we go into a recession, it's that debt that makes them highly cyclical. Governments are telling them to produce a lot right now, because they don't like the price of oil. But we want you to disappear entirely in 5 years because we're moving to purely renewable sources of fuel. If you're an energy CEO, you want a fortress balance sheet and to hang on to capital. Results in higher prices, lower production, and great cashflow.

Keeping a portfolio tight amongst all the opportunities. He holds quite bit more than just 20 stocks. He might have 100 longs and 100 shorts in a fund. Individual investors can stick to 20 stocks if they look for reasonable price, high quality of earnings, and trending up. Narrow it down to the best 20.