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

For the moment, the Fed is leaving interest rates alone and sound less eager to tighten. This gives investors the confidence to buy stocks of companies that just great numbers.

Historically, we're starting a bullish six-month period where stocks tends to rise. The last 6 months this year and in 2022 were weak. Why? Historically, people de-risk in the summer, but come back in the winter; analysts start the year positively, then rewrite their outlooks and downgrade so they can meet their end-of-the-year (were too optimistic, then adjusted). A worry is the $2-trillion deficit in the US as America keeps spending. We haven't seen a true slowdown here or there, but governments cannot keep spending like this.

Seasonally strong from February into May, then July to early October, which happened this year. But seasonally weak now. He's bullish oil. Wait on oil till December.

When the VIX falls below 15, the market is less volatile, and very volatile at 40. Today at 19, it's average. Be careful using the VIX to predict returns, not recommended. The VIX around 9 is vulnerable to complacency, and at 40 the market could be bottoming.

War & geopolitical conflicts making headlines, but real concern for investors is interest rates. Believes investors are starting to believe US Fed will keep rates higher for longer. Stronger economy & high US Fed spending will also ensure rates are buoyant. 40 year downward trend in rates is starting to reverse. 

Eerie Stagnation: Major Indices Trapped in a 2.5-Year Time Warp:

The major financial indices, the S&P 500, the Nasdaq composite, and the TSX, have all been mostly flat since mid-2021. This eerie stagnation has occurred through a series of melt-ups, meltdowns, and lots of choppy sideways action. The past 2.5 years have been plagued by high and rising inflation, elevated interest rates, and bursts of economic shocks, leading to a stagnant stock market. 
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The market is oversold. What does it need to breakout? 1) New bond buyers and no more foreign selling. 2) The Fed stops selling its bond hoard. 3) Data showing growth without inflation. 4) Ending giant forecast cuts. 5) Stop dumping the stock of well-run companies in a temporary rut, like Danaher 6) Accepting a potential forecast cut by Apple. 7) No more price target cuts. 8) End of rate-cut predictions. 9) Wage cuts or no increases, which are impacting the car industry for example. 10) Wars contained, namely Israel/Hamas.

Global oil inventories at lowest levels since 2017. Oil demand remains strong as recession fears have not come to fruition. Believes OPEC will remain disciplined to bring on new production. Expecting Saudi Arabia ~1M bbl cut to remain through end of Q1 2024. Energy stocks do not require anything higher than $80 WTI. Discount on energy stocks remains very high. Final debt targets are being met across the industry. Large stock buybacks and dividend increases on the horizon for energy investors. Balance sheets and free cash flows are the best in the history of the industry. 

Canadian Bond Prices Haunted by Soaring Yields

Bond prices are inversely correlated with interest rates, and thus, as interest rates rise, bond prices fall. Investors have traditionally liked bonds for their low correlation with the equities market, but over the past three years, this low correlation has led to a 35% decline for the iShares Core Canadian Long-Term Bond ETF (XLB). This decline comes amid a meteoric rise in the Canadian 10-year bond yield from 0.6% to 4.1%. 
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Chilling Drop: Canadian Utility Stocks' Plummet

It has been a bloody and brutal few months for Canadian utility stocks, as investors worry of the ramifications from a ‘higher-for-longer’ theme. Utility stocks were particularly bruised as these names are well-known to carry significantly high debt loads. It was not only the high debt burdens that utility names hold, but also the weakening prospects of the yield provided by utility companies versus a relatively risk-free GIC or high-interest savings ETF which are yielding more than 5%. The iShares S&P/TSX Capped Utilities ETF (XUT) posted a 16% rolling-three month decline, matching some of its worst drawdowns from the past. 
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Earnings season (so far) has been better than expected, but YOY earnings growth bottomed a quarter ago, and such growth is modest now. Market reaction is very subdued; economic gravity is setting in as companies offer modest guidance in Q4. Investors are trading down Canadian banks to fresh lows and they face difficult comparisons and pressures to net interest margins. Also, the banks have been cutting staff.

The operate very different; US banks face a lot more competition and Canadians enjoy a tight oligopoly. Canadian ones pay higher returns consistently and grow dividends faster. Canadians don't stretch balance sheets and are more conservative. Regulators are closer to our banks. Canadian banks gain a foothold in the US by buying US regionals. A big plus. So, he chooses Canadian banks, hands-down.

The size of the U.S. deficit is scary. But he expects yield-curve control to be imposed on Western countries. So if rates rise above 50 basis points in, say Japan, that government will buy all the bonds to get the yield down by 50 points. The market is waiting for the switch from QT to QE. The US Fed will have to be the last resort-buyer of debt.

OPEC+ is down 4 million barrels/day in supply which is putting a floor on the price. But he sees a recession coming. Add to that China's output falling. So, oil prices should be lower for these reasons. He already made his money in oil, but will wait and see before returning. Macro events mean everywhere, not individual stock plays. Doesn't know where oil is going, whether higher or lower.

Likes physical gold, not the stocks, gold that's already mined and smelted.