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

Markets. We entered 2022 with a lot of volatility and uncertainty. The invasion of Ukraine elevated that across all sectors and asset classes. Commodities are spiking, and that's going to make the problem of inflation even worse, plus there might be a knock-on effect of slowing economic growth. In this environment, you want to focus on companies with resilient demand and some sort of inflation protection in revenues, and that's precisely where infrastructure equities shine.

Infrastructure sector. The space is quite broad. In general, infrastructure equities provide daily essential services to a majority of the population in a supply-constrained manner. Even if growth is slowing, their essential nature makes them not likely to see as much demand destruction as the cyclicals. Think waste collection and water. A lot of the business models have inflation-linked contracts. Putting these two things together, infrastructure is a great place to be, whatever geopolitical path we take from here. The sector provides defensiveness plus inflation protection.

Advice for clients amid the Russia-Ukraine conflict. Every client is different. Take a long-term perspective. The invasion has put the spotlight on too much dependency on Russian oil and gas, especially for Europe. For the next 6-18 months, we're going to see greater focus on renewable procurement, more R&D in technologies, and a push from countries including Canada and the US to generate more energy domestically. This is a different tune than recent narratives, but civil rights and security and safety of the world take precedence over ESG concerns. Certain things can be done to mitigate the carbon impact. We need to get more oil from the Canadian oil sands and from US shale. We just can't depend on a country like Russia, given the aggression they've shown on the local stage.

Is there more support for Canadian infrastructure now? Too early to tell. Since the pandemic, there's been a slowdown in Canadian and US names. Yes, the path forward is to go green, but Europe is so dependent on Russian oil and gas. To reduce Russia's leverage, Europe needs to get oil and gas from somewhere else, and Canada and the US are probably two of the best options. We'll see a small increase in production to allow us to transition to a more renewable-friendly grid, and if that means 4-5 years of extra North American oil production, that's a good tradeoff to reduce dependence on Russia.

Towers or carriers? His advice is to diversify from carriers and own some of the towers such as AMT, SBAC, or CCI. Carriers have held up quite well, whereas the towers have sold off in reaction to interest rates. In general, if the carriers are doing well, the towers will do well.

Utilities space. The pecking order of his preferences is renewable IPPs, energy infrastructure, and then regulated utilities. He likes names like BLX and NPI. See his Top Picks.

Canadian infrastructure ETF? SCGI, run by his firm, trades as an ETF on the NEO exchange. You could also look at the ZGI, though SCGI has outperformed it.

Impact of traditional energy getting into renewables? It is having an impact. It's the right decision. They're allocating a lot of capital to areas that will have a lot of growth and it's a key area of focus for investors. But he'd rather own companies that are 100% focused on those areas, rather than 10% as ENB and TRP are. Names like PIF, NPI, and BLX are pure plays in the renewable energy space. There's a lot of opportunity out there, especially with valuations of renewables that have sold off.

The Fed's Powell told Congress today that he wants to raise interest rates by 0.25% this month and that inflation has been higher than expected. She feels inflation will be lower in time, though well above 2%. Today Powell bought a little time, and him hiking rates by 0.25% was enough to maintain his credibility.

Energy is the only bright spot in the market among a wall of worry. Results in earnings have been quite good, so investors should take advantage of low stock prices. There are opportunities if you know what you want. Concentrate your portfolio. In 2021, indices were strong across the board, but in 2022 you must be selected. He doesn't spend a ton of time focusing on the macro--there are so many factors at play. For instance, in 2020 with Covid who would have foreseen a fantastic two-year run in stocks?

Educational Segment. Learning how to use the VIX index can help. When looking at volatility expectations, when current volatility is higher than expected volatility in 4 months, if the former is higher then there is much bad news priced in. VVIX is the volatility of volatility. VVIX has remained high. The VVIX is now anticipating high volatility, and is a leading indicator. We are close to a bottom according to this. However, we are close but not there yet.

Rising interest rates will be more of a challenge for high multiple, high growth stocks. Have been seeing this with SHOP for example. This becomes a buy but we are just starting the rate hike cycle. Wednesday is a big day, as we will hear from Central banks.

Markets will move on the headlines and he is not sure if there will be a deal between Russia and Ukraine. Thinks things will get worse before getting better probably. There are other elements like Bank of Canada raising interest rates. Rates are stimulative and there are inflation pressures down the road. The supply chain, cyber security, etc. worse and more difficult. Cutting interest rates or doing QE will not solve anything.