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

The market was looking for an excuse to sell off. There has also been an underlying shift from growth to value happening. Hedge funds with over exposure to growth are now hurting and are now de-risking. The new variant is a cause of concern, but also we will need to live with them now. A healthy sell off to get off some fluff.

People who have had good profits with concerns about inflation and interest rate concerns did not cause a huge sell off. This has now realized and markets are de-risking.

Energy stocks, forestry, and resources companies are cash flowing. The pull back is not the end of the energy run.

Most exciting factor in tech right now? Barometer for tech is the semiconductor sector (foundaries, manufacturers, designers), the engine of the market. It used to be the transport index, but now it's the semis.

Long-term period of semi shortages? The sector is so massive, it takes a long time to change the direction of the ship. Pricing of stocks goes out between 6-12 months. Market's telling you that you'll have balance in the second half of 2022.

Demand for semis won't be coming down in future. True, but that's why they're building up the supply side. For example, Samsung is building an $18B factory in Texas. Demand is outstripping supply now, but fast forward a year or two and it's going to be the other side of the coin, with massive supply.

Tech and interest rates. The software side is extremely vulnerable to interest rates. Growth rates for SaaS companies built into the cloud stack is such that it affects the PE multiples and also their borrowing ability. They're vulnerable to the yield curve. Still have a real yield repression by the central banks. Now at a juncture where Fed is tapering and prospect of raising rates going into second half of 2022 is going to take the real yield repression off the table. At the rate things are going, the S&P 500 could easily hit 5500 by mid-2022, and upwards of 7000 by 2023. Central banks are worried that if they don't pull back on liquidity, they're going to create an asset bubble.

Writing calls. He often writes calls when a stock gets within 20% of his price target and he doesn't really want to sell. It's pretty good protection.

Portfolio review at this time of year. He meets with clients on an ongoing basis to do annual and semi-annual reviews. This time of year isn't necessarily any busier. Looks for tax efficiencies that they can create for clients.

Tax-loss selling as a useful tool? It can be, but his clients don't have a lot of them to worry about. Markets have been pretty strong, and portfolios have been doing quite well.

Covid 19 trends in the US and Europe. This next wave is causing a bit of investor concern. Bit of anxiety and volatility in the markets, but this should be short-lived. Worst of the pandemic is probably behind us, given rising vaccination rates and anti-viral pill treatments coming down the pipe.

Not time to be defensive? No, it's more of an opportunity to take advantage of some of the cyclical areas. See his Top Picks. Latter part of the year going into the new one is historically a seasonally strong part of the year. Still likes the cyclicals. Take advantage of some of the beaten up names. Going forward, look ahead 6-12 months to see where the economy will be and where we'll be with Covid 19.

Megacap tech names in 2022 There will a lot more Fed in 2022 by tapering and raising interest rates. In early-2022, investors will have to re-price a lot of high-valuation growth that isn't profitable, and eventually they'll get to the megacap names. Look at Q1 this year and what reversed? Answer: megacap tech and the Nasdaq reversed a lot of those early-2021 gains, though has since gone up a lot since. Most troubling is that Microsoft, Apple and Tesla have made huge gains this year and in just recent months--it isn't sustainable as growth stocks are re-priced. These are expensive stocks in terms of PE.