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

Covered call ETFs. When market's are strong and the underlying securities are doing well, you will get a higher distribution, but you'll give up something in total returns. He really likes the covered call strategy if you feel that underlying index is going to be flat, so you get the principal appreciation, covered call option, and the dividend. They don't protect you tremendously in a down market. He likes ZWU, a basket of telecoms and pipelines, where you get the high yield plus the covered call option premiums.

Finally, a session didn't fade into the close. Markets rallied strongly today. This could be a relief rally; the market could return to bull mode. True, there are many uncertainties, starting with bearish Sept/Oct seasonality. But a rally can endure if these happen: good job news, moderate inflation, semiconductor shortage relief, the supply chain constraint eases, port conditions improve, earnings that reflect supply meeting demand, stable input cost hikes, open schools, far fewer hospitalizations, more airline passengers, hotel occupancy rises, rising interest rates due to more economic activity and not inflation, slowdown in underwritings, more stock buybacks, and Washington and Beijing to get off the radar screen.

Consumers are in good shape, though US income subsidies are ending. Consumer sentiment has weakened which may moderate spending, but household incomes have returned to pre-Covid levels while savings rates have soared. Consumers want to travel (domestically for now), eat in restaurant and go to ballgames. Consumers make up 70% of the US economy, so these are good trends. Governments are now reluctant to impose lockdowns (she doesn't see this happening), because vaccines are taming the pandemic. Instead, governments will use vaccine passports, but this will be a catalyst to get people vaccinated. Also, companies are mandating their workers get jabbed, which will also erode vaccine hesitancy. Today we saw low US CPI/inflation numbers, is moderating. Most central banks feel inflation is transitory. It's taking time for supply to return to norm, given ongoing supply shortages. It's important that developing countries get vaxxed, or else shortages will endure.

The Liberals' plan to tax financial companies and impact on shareholders. The banks are insurers are a key part of Canadian investor portfolios. If the plan happens, these companies will manage this tax in the end. These companies make a lot of money, though the tax is not a good capital markets development.

We're not overvalued, but are stretched. Conviction in this market has slipped a little entering autumn. The recovery is performing better than expected from the start of the year. He doesn't see a massive pullback coming. The Delta and inflation are two forces investors must watch. September will likely show meaningful gains in employment that will effect stocks through the rest of this year. Inflation fears of last spring have come off; investors are gradually agreeing with the Fed that inflation will be transitory. But what fiscal packages will arise in Canada and the U.S? The Fed won't do anything drastically and won't make major moves until next year, probably.

Educational Segment. Jeremy Grantham, renowned value investor, put out a report arguing value should come back. The percentage of US companies trading at 10x revenues is not quite as high as the peak in 2000, but it is still extraordinarily high today. On real basis after inflation, the expensive stocks trading at 10x sales did no better than bonds. You have a market environment that is crazy today. Value should preform better than growth. Value is trading at 40% discount to where it traded historically. He is increasingly moving into the value stocks.

Market outlook. There are signs of stagflation. Globally, inflation pressure is rising. There is a persistent uptick in inflation expectation and retail sales are wavering. The US economy may be in recession. The fiscal cliff with support being cut off could lead to spending stopping.

Stimulus. If this fiscal cliff comes, unless there is a robust economy next year, control of congress will move. The progressive policies of Biden's administration will not go through. They are pushing through spending bills. There are some political fallouts from the reconciliation process.

Federal reserve. The delta variant's R0 number, the transmission rate, has come down significantly in recent weeks. There is good news on this front. There is uncertainty around the debt ceiling and the financing needs of next year. It allows the fed to go slower. This makes inflation the biggest risk if it is not transitory.

There's consistency in this market will various sector taking turns in leading. This will lead to buyer's remorse as investors chase the Nasdaq then suddenly want the S&P. Seasonality predicts a confluence of negatives that lead to a sell-off. Oil and has is the only sector with true staying power; Occidental jumped today. The again, high energy costs push inflation for all other sectors; your cup of coffee gets more expensive. Also $70 oil always leads the Saudis to boost production to cap the price and keep their American competitors in line. Inflation is rolling through all sectors of the economy, markedly up from last year. Meanwhile, there are supply shortages which don't help; this hits industrials and transports. Meanwhile, retailers are struggling to get product for Christmas as stuff is stock at overseas ports due to Covid and other reasons. tech has been bid up, but it can't go further. Keep cash and take some profits by Sept. 17 when markets tend to dip.

September outlook. September is a seasonally weak month on average. -0.9% is the historic average for the TSX. Market sentiment seems there is a risk off atmosphere. There is political risk with an election up coming. With the back to school season and delta circulating, there are reasons. You can still buy into weakness. Still bullish moving forward.

Has exposure to value and cyclical trades. There is a good weighting in secular growth stocks. They also hold interest rate sensitive or defensive plays. Their most recent purchase is an industrial purchase.

Industrial sector. It's not a homogenous sector. Transportation sector has seen logistic problems so there is a lot of pricing power. There are shortages of trucks, as well as labour. It's difficult to get qualified people. More broadly, the sector is pro-cyclical and demand is coming back.