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

Earlier in a cycle we see a rise in interest rates, because the economy is doing well. Late in a cycle, the 2- and 10-year yields start to narrow and the yield curve flattens or inverts, and that's when rates become a real headwind. We're now in a re-adjustment period where the high-growth stocks with limited earnings get hit and markets are volatile. Bit it's a healthy shake-out. Near term, inflation will be elevated, but the five-year expectation is 2.6%. So, inflation will trend down. The Fed is managing inflation but doesn't want to kill demand either. Once supply chains return to normal, inflation will decline.

Educational Segment. There has been many talking about value stocks over growth stocks should perform better. What does this mean for the TSX? Canada is more of a value market since there are less high PE tech stocks nor consumer cyclical. There is more mining, energy and finance. Looking at Canadian value ETFs compared to the TSX overall, it started to diverge in September. Want to tilt your exposure to value this year.

Following rhetoric from the Federal Reserve, there is a 50% chance that the BoC will raise rates next week. There could be some implications on the currency side. We could see a complete reversal from incredible support to something less supportive. There are 3-4 rate hikes priced in. There should be no surprises. It depends on how the markets respond. Value outperformance will be a theme for 2022.

Following rhetoric from the Federal Reserve, there is a 50% chance that the BoC will raise rates next week. There could be some implications on the currency side. We could see a complete reversal from incredible support to something less supportive. There are 3-4 rate hikes priced in. There should be no surprises. It depends on how the markets respond. Value outperformance will be a theme for 2022.

Looking at traditional banking, net interest margins and loan charge offs were good. Trading was a bit of an issue for investment banks. However, traditional banks could see positive earnings.

WTI. There is resistance at $85 for WTI. We could expect some selling to show up. There is value and rotation happening. There is also inflation. Will speculatory demand drive us through the resistance. Thinks we will see it. There is probably still some more upside in the underlying names. Energy should outperform tech for the next quarters.

There is market volatility now but he is optimistic. As an optimist he has never known a rich pessimist. The interest rate and credit markets are telling us that the probability of a recession in the next 12 months is low. He does go to cyclical stocks but only when there is a positive yield and it makes sense. There are two causes of the end of a cyclical run: recession and an industry that over-invests thereby creating an over supply.

He likes energy now since the backdrop for a cycle in energy looks good. There has not been over-investment, i.e. lack of investment, so therefore no over-supply. This is good for the sector.

Recommends increasing exposure to banks in both Canada & the USA. Rising interest rates is good for financial companies. As interest rates go up, banks are able to pass this cost onto costumers without increasing costs. Owns RBC and would recommend buying it.

Market correction. Whenever you have a yearly gain of 25% in the S&P, you always have some give back the next year averaging 6%. Seeing some sloppiness in the NASDAQ, almost hit a technical correction just shy of 10%. Still in a bull market, earnings still going up. If the markets do pull back, don't sell in anticipation of that, but deploy some cash if you have it.

Odds of Canada outperforming US? High. Three horsemen: materials, energy, and financials. They're all in the sweet spot, but have all underperformed the S&P dramatically for years. We're now ahead in earnings protection, lower valuation, lots of opportunity to return capital to shareholders and increase dividends. CAD going up is a reason for global investors to take note. If BoC doesn't raise rates on January 26th, he'll be disappointed.

Canadian bank index hitting a record high today. Great place to be right now. Higher interest rates, loan growth, growing franchises internationally, green light from OSFI to return capital to shareholders, still not expensive, growth rates look OK. Steepening yield curve will really help on net interest margins. A good bet right now.

Tech names. Last quarter, MSFT beat on revenue. He's modelling 17% EPS growth, which is pretty good. Trading at 29x 2023 earnings. Price to growth is compelling. Pick away at lower levels. Big tech alternative that's even more compelling is FB. Both are buys. But real value right here, right now is AMZN, with price to growth at almost 1, 42% growth rate, trading at 32x. Tech is dominant, so it's in the cross-hairs. The government's going to find a way to chip away at that over several years, which often unlocks value. If you can buy a company that's growing predictably at 40% and trading at 40x, that's a good buy.