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

Oil outlook as the price keeps surging It's likely oil will see another boom-and-bust cycle; ESG is a major influence as investors move out of oil and into renewables. He's long oil. He sees a trade in these oil stocks, though. He prefers the integrated energy companies (didn't name one).

Mastercard announced that any of its merchants can soon offer crypto services. It's a very big deal, this adoption of cryptos. He sees four phases of crypto adoption: the venture capital phase, growth phase, commodity phase, and now it's heading to the last phase where Bitcoin becomes a usable currency through Mastercard.

He's very bullish and staying in the market. not selling. Wage inflation is transitory and he sees normalization coming in the next few months. He's not surprised by bottlenecks, post-Covid. This is a stockpicker's market.

His outlook is long term. There are no great asset classes now, given inflation and interest rate concerns. Nothing looks great. He's been to conservative this year, though he's done okay with oil and other commodities. How will rates behave next year? It's impossible for anyone to know, including the Fed. If the US 10-year stays around 1.6%, stocks will probably go up by 5-10%, and he'll play the game by going in and getting out. But it's stupid to buy bonds at 1.6%. Will people keep buying bonds? And selling stocks means paying a large tax bill. Stay exposed to stocks for the long run. It's likely the Fed will taper next month, but he doesn't know what will happen. Overall, he doesn't like the market now. It's like Vegas now.

Cryptos Cryptos are a storer of value, but he doesn't own much of them. The question is, What should the price be?

Megacap tech stocks He's looking for companies with pricing power and increased demand for their products and services, like the megacap techs (which he heavily owns) reporting next week. He won't time the market, but will stick with stocks long term. If you time the market, you could miss the run.

Markets ugly in September, better in October. Following seasonal trends where September is historically a tougher month, but rebound in October. Q4 is usually the best quarter for returns, with the highest positivity rate just shy of 80%. Covid cases are declining, economic data remains solid, US corporate earnings remain strong. All pushing market sentiment and stocks higher. Still worry about supply chains, tapering, and inflation pressures, so this will make the markets ebb and flow.

Cautious on precious metals. When there's an economic recovery, you want to be in more cyclical types of commodities such as energy, soft commodities, and mining and base metals. Trends for gold and silver have not been positive. Better to be in the metals that tend to do well when the economy is improving.

ETF for European banks. EUFN is a basket of European banks, insurers, investment managers, and diversified financial companies. Likes European banks, as they're cheaper than ones in Canada or US. Half the price to book of US financials. 48 bps. A good value play into a sector and a geography that hasn't been performing well until earlier this year, and has a lot of catchup room.

Dividend ETF. XEI is a basket of banks, pipelines, energy, telecom, insurance, electric utilities, and so on. 3.9% yield. Good area to be in if you want to be in Canada.

Canadian banks. Broadly speaking, Canadian banks make a lot of sense. Probably will see dividend increases and share buybacks at some point, when the gates open. Interest rates moving higher and economy on the mend are tailwinds that will benefit financials in general.

Where do we go from here? We're in the midst of Q3 earnings, and it will be telling to see if tech stocks can keep up to growth estimates as they did so well last year. Banks represent the borrowing and lending side, and that's come in strong. We'll have to see how supply chain disruptions, inflation, labour shortages, and higher energy costs affect the rest of the economy.

Short equity hedge explained. His tech fund has a 42% short equity index hedge position. In one hand is the stock portfolio with about 28 names, and 5% cash. A short index overlay on top of that smooths out volatility, and if there's a downdraft of more than 7-8% it starts to contribute some profits.