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

The first 4-6 weeks of 2022 will be the decision time for many investors to see how aggressive the Fed and inflation will be. If Omicron isn't so aggressive, that may ease supply shortages. Heavy cyclicals (energy and materials) vs. high-growth stocks: to pile into in either is risky, so she advises a balanced approach. Big cap tech could do well in coming days, and oil could move above $75. You need to be positioned differently in the first half vs. the second half of 2022, but that also happened in 2021. Likely you need to change positioning going into 2022, which will happen in January.

Despite Omicron, people are still investing in this market and will continue into 2022. He thinks the Omicron won't be as bad as we thought. So , expect higher earnings (PE) and buy big tech. Also, healthcare will be another growth area in 2022.

Tech and semis look good today as well as last week. There's a lot of activity both in macro among the SPDR calls and heavy options activity in individual stocks like MSFT, AMD and Nvidia. These buyers expect this to be a strong week and not only rallying today. This could be the final rally for the year. We're in a choppy market and this will continue. There have been big bounces in semis and crude oil, however trading volumes have normalized. People are getting a little bullish now.

Inflation bifurcation in 2022. In 2021, everything went up in price because there was lots of market liquidity. But as the central banks rein in liquidity and governments cut back on spending, inflation will still exist, but some things will go up in price and others will remain the same or go down. As liquidity's removed, luxury items won't do as well this year as last. Inflation will keep going up for necessities, as demand for them will continue. You'll have to be particular about which sectors you want to be in.

Tech stocks in 2022. Tech stocks have dominated the market. Market breadth has narrowed. Investors are focusing on large cap tech names. Right now, investors think about switching horses from tech. If interest rates start to tick up, you might see tech start to take a back seat. Some of the cyclical sectors might do quite well at least in the first part of the year. Some of the cyclical sub-sectors like metals and mining have been doing quite well, but not a really strong performance, and this could change in the new year as investors make some changes. Healthcare might be another area to benefit from outflow of funds from tech.

Time to buy gold miners? Thinks so. Gold miners have done terribly this year, and are tax loss candidates. Seasonally, gold miners start to pick up this time of year. Gold miners are spinning out all kinds of cashflow. Negative sentiment, but sometimes investors start to refocus in the new year and may notice that these names are on sale. Seasonal tailwinds can help push them up at this time.

REIT seasonality. REITs usually do well from March to October, but this might start earlier this earlier, especially if markets turn down. Wait until February/March.

US financials seasonality. We're just starting to see the seasonality for US financials, which usually runs from mid-December to mid-April, though it can start in January. US financials have recently pulled back compared to the S&P 500. They're much more sensitive to interest rates than Canadian banks, because the Canadian banks have much higher dividends. US financials react strongly to inflation and interest rate movement. At the beginning of the year, inflation and interest rates tend to pick up. He's bullish on both US and Canadian banks. In the States, he uses the XLF, which should do well coming up in the new year, especially if interest rates and strength in the economy start to pick up. If investors can look ahead to when Omicron numbers decline, which they will, they'll see this sector do quite well seasonally from now till mid-April.

Tech ETF right now? In the US tech sector, granddaddy of ETFs is the XLK. There are some tech ETFs in Canada. Tech did extremely well from late October until early December. Seasonal period takes a brief hiatus, and then picks up again until late January. Performing well. He was overweight tech, but has taken that back as he transitions to the new year. Rotation might take funds away from tech towards the end of January. We're still in the window, but it's getting late to issue a "buy". If you're a trader, there could be some opportunity for the next month or so.

Auto sector. Hard to predict when bottlenecks will resolve. Everyone's pointing fingers. If he had to guess, earlier in 2022. Already seeing cargo ships rescheduling, and other active measure. Right now, it's still a mess. He'd hold off. We're in the seasonally strong period until February, and we might actually skip that this year. Wait to see more progress.

Thinks "Santa Claus" rally will occur next week because of momentum and quantitative traders who believe in growth stocks. Biggest lesson investors can learn is "don't fight the Fed". If Fed tightens rates, equities will go down. Higher interest rates will lower earnings and increase market volatility. Diversified portfolio can protect from rising interest rates. Generation of investors who haven't experienced major crashes (1999), who he expects to keep buying dips.

Market Outlook A big lesson for 2021 through the pandemic was that for as fast as things fell, we as human beings adapt quickly to a new normal. We can thank science and technology. His portfolio is expecting somewhat higher interest rates, which would be healthy. Corporate profits should be very good for companies and higher bond yields will be bullish. Many company's balance sheets are in great position, so even higher interest rates won't impact these companies. High yield bonds tend to do well during periods of rising interest rates. From a credit perspective, issuers are in great shape, balance sheet wise, which makes him think this category will again dramatically better low yield bonds next year. He thinks energy stocks are too volatile and are highly correlated to commodity prices. He thinks oil prices above $75 will not likely be sustainable.

When was the last best buy opportunity? COVID was an excellent time and they told investors to get in. The other time was when he bought his house after 911, when it was worth 25% less than before. The world will never come to an end and we as humans will adapt. Always buy book quality companies.

A high yield bond ETF recommendation? One needs to have a diversified portfolio as there will be defaults from time to time. They tend to be shorter in duration, therefore, less sensitive to interest rates. He does not have a specific ETF to recommend. He advises that most high yields are in US dollars, so look for an ETF where the currency is hedged.