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

Today is a bear market bounce today and won't sustain, but at some point a rally will sustain. Lockheed Martin and Abbvie, for instance, we are doing well, because they are good companies. You must stay invested int his market, but buy quality names like these. It depends on the Russian war and China's lockdowns. Today isn't the bottom. Hold a little more cash than usual to deploy during opportunities.

The Nasdaq has been very oversold. Today, the smallcap techs are especially ripping. All tech still has so far to run. But sentiment in the short term at least has shifted. We'll see if the intraday rally holds by the close. This won't be a quick bounce like Dec. 2018 and March 2020, but rather a paradigm shift with a slower grind going forward. Be patient. But don't pivot out of growth and into free cash-flow companies.

As bearish as he is, he's been expecting a bounce like today. Volatility remains high and he will remain bearish. Inflation will persist as well lower earnings revisions. But now you can buy stocks selectively, just not wholesale.

Healthcare amid volatility. Challenging environment, to say the least. Macro uncertainty, inflation running hot, interest rate uncertainty. Relatively, healthcare is holding up quite well given the volatility we're seeing. But not all healthcare. Some areas, like smaller cap and higher growth, are more impacted.

Grey tsunami fueling bullish outlook? Absolutely. Healthcare is one of the very few areas of the market that's well positioned for the aging population dynamic. As people age, they spend exponentially more on their healthcare needs. There are non-cyclical drivers as well, like developing markets and technological innovation in medical devices, pharma, bio, and bio tech. The macro environment is very strong. Visibility across many sub-sectors is challenged with rising interest rates. Healthcare is known as a superior good, and so it has pricing power. We need it in up and down markets. Healthcare is where investors should be. Canada has few offerings. You should be looking for at least a market weight toward the sector, which is 13-15% globally.

Criteria for healthcare stocks. Dominant companies, proven ability to execute over economic cycles. Large cap with diversified product lineups. As you're reviewing and rebalancing your portfolio, you really want to be in quality companies. Robust financial metrics, reliability of earnings across economic cycles.

Boost to brand recognition from Covid? Early on, yes. More so for Moderna, which went parabolic. Not so much for PFE. If PFE can build out its pipeline, we should see the stock get re-rated.

Interest rate hikes and the overall market. Biggest source of volatility will be not what interest rates do, but what expectations are for those rates. Driven by inflation, supply chain factors, and Russia-Ukraine conflict. Sees very small signs that inflation is peaking. For example, shipping container prices are starting to roll over. Signs, but no trend just yet. Bearish sentiment is the second-lowest it's been since 1990. Last time it was at these levels was 2008. If we don't see as many hikes, market is spring-loaded for a bounce. But there's still uncertainty. Look for good quality businesses, areas with visibility, less exposure to cost on the input side. Healthcare seems to have some of these characteristics.

US inflation. Sees inflation either peaking now or close to the peak. As inflation cools, he has confidence that the Fed will be able to take its foot off the gas a bit, which will be accommodative to markets. Important to understand that bond yields are way below what they've been for the last 15 years or so. Healthy to have a normal yield curve, so that when there is the next recession, the Fed has room to cut rates. Bulk of the bond market increase has already happened. It may go to 4-4.5% at the outside. Consumers are in excellent shape, wages are rising, there's a lot of money on the sidelines to spend, and he's still bullish on corporate earnings. Remember that, 12 months from now, the war in Ukraine will be resolved somehow, China's shutdown will be resolved somehow, and we'll be talking about something else.

Turnaround coming for tech? You have world-class companies like AMZN that make money, have a great market share, and are dominant. Then you have companies that are losing money or trading at sky-high multiples, which remind him of the NASDAQ in the late 90s. AMZN has retraced back to where it was before the pandemic, so he sees value. For a stock like SHOP, AMZN is stepping up competition, and it's still not cheap despite the decline.

Areas of opportunity? Financial services, banks in particular, have been hammered globally. Canadian banks have outperformed, and have fallen 10-15% from where they were a few months ago. Global banks in the US offer great opportunity with cheap multiples, earnings multiples, and healthy dividends. Credit and consumers are in great shape. If we don't see a steep decline in the housing market, the loan books will remain in very good shape.

Short-term, inflation-linked bonds. Hold or sell? After years of lagging, a bit better today. Important to read the fine print so you're not caught off guard; it will show the yield you're getting above inflation. Yield has popped, but looking forward, we're getting to the time when you should switch to a more normal bond fund. A large part of the move has already happened.

Bond fund for 81-year old widow? You're looking for liquidity, income, and low tolerance for volatility. Shorter-term to medium-term bond fund. Not the Canadian Bond Index, which has a much longer duration and so is much more sensitive to interest rates.

High-yield corporate bonds. Incredibly opportune asset class today. In a rising rate environment, high-yield bonds are usually the best performing fixed income asset class. One proviso: bulk of high-yield market is in the US. Canadian high-yield bonds are in oil & gas and mining. Buy a fund with the majority of bonds in the US and currency hedged, so if USD goes down, it won't hurt your return.