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

Today's jobs report was better than expected. He does not agree that good news is bad news (strong employment is bad news). Sure, we worry about inflation, but he sees a soft landing by the US Fed. For more than a bear market rally, the Fed needs to back off and it won't until inflation weakens. Next week comes more inflation data. All rallies are suspect until there is lower inflation, but he feels that inflation has indeed peaked. Inflation should be well on the way down in a couple months. He projects the S&P to finish at 4,896 by year's end.

She predicts the Fed to hike more than 50 points, based on the Fed's signals. The Fed needs to hike 75. Wage growth is starting to trend lower despite ongoing 3% unemployment. The former will effect margins in the back half of the year. Probably stocks will be up 1-2 years from now.

tech stocks She owns all the FAANGs. There will be lower GDP growth, which will mean a rotation from cyclicals to traditional growth stocks. But be careful. Secular growth in the US will be driven differently this time. Focus on companies that help other companies become more efficient. Don't limit yourself to software. Also, tech will be hit by currency concerns.

Markets. It's the beginning of putting in a bottom. We put in a bottom in June. We'll consolidate here for a while, maybe with a lift for a bit, and go sideways for a time. If you look at previous bottoms, there's a theme: put in a bottom, consolidate and go sideways, and hopefully the next down move won't be followed by breadth in the market.

Signals that the market's moving higher? Leadership on some of the bigger stocks. Last cycle, it was the FAANGs. This may repeat, or others may lead. Look for stronger and stronger breadth. You're starting to see this with AMZN, GOOGL, and MSFT. They're starting to show relative strength against the market, and that's a good thing.

Areas to invest in now? He's been adding positions that he sold earlier in the year. In the last 2 weeks, he's added 2 Canadian banks. He's adding to positions he lightened up on. Now it's a matter of figuring out where the leadership will come from. Where do you want to be? Where do you not want to be? Quite a rollover in commodities in the last few weeks, so perhaps the bloom is off the rose. It's too early to say, but maybe the main momentum of commodities is over.

Difference between ADR vs. ADS? Essentially, the same thing. One is a receipt, while the other is a security.

How do commodity prices affect the pipelines? Not so much, as they're paid a toll to transfer goods. Not the same type of exposure that the producers have.

Canadian rails as long-term winners? They're a proxy on the economy. CP, especially, is a proxy on the Western economy. Both CNR and CP have done very well. Both are trying to expand north-south routes, which is very important going forward. Market dip is an opportunity to add to both.

Gold. He prefers the bigger gold stocks at the beginning of the cycle, such as AEM, ABX, and NGT. Those ones will move first. You can then drop down to the intermediates as the cycle matures. You gain comfort from the bigger players, with more diversification. You can also buy MNT, as a proxy to gold, which is gold sitting in the Royal Canadian Mint.

Putting money to work on the cusp of a recession? This market has discounted a lot of bad news. He still thinks this is a bull market. For other slowdowns in bull markets, most of the corrections were 10% inside a bull market, though they went on for longer. Right now, we're down 30% on the NASDAQ and 20% on the S&P over 6 months. It's an opportunity to add. You don't have to buy everything all at once, but you can start to take your positions and put the money in over the next few months as the market starts to build a bottom and work its way through.

Markets. Lots of volatility. Stocks and bonds have been challenged this year, due to higher interest rates to combat inflation and less liquidity in the overall market. Volatility likely to stay high. 90% of days in 2022 in the S&P 500 have had a swing of 1% or more. Running out of places to hide. Historically, we've seen pretty significant bounces in the second half of the year, and there's a good chance in 2022. What will drive that is a possible peak of inflation and the earnings trajectory.

Oil in the second half of 2022? Until the last couple of days, energy had been the best performing sector by a wide margin. Energy was up 20% in both the US and Canada, whereas the broader indexes are down between 10-25%. Energy may consolidate for a while; the fundamentals look quite good. Market is tight, not a lot of new production coming on. Medium-longer term, the price should remain elevated. Short-term, fears are triggering some exaggerated moves. Be a bit cautious in the next few weeks and months, but over the next 12-24 months it should be a good outperformer versus the broader index.

Energy sector. With energy, the market should be higher for longer. Pretty good demand profile, despite any slowdown. Not a lot of new production growth. Volatile year, war premium on prices. Companies should return cash to shareholders. Recent volatility may be due to profit-taking on sectors that have held up best. If volatility continues into the third quarter, you want to buy back into the higher quality names. Small-mid cap stocks are the most volatile, but give the most torque to the upside.