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

Bond yield keep rising, but remember that they're returning to where they were before, like 2008. Between 2008-2020, yields were very low. Investors have a choice of investing in a GIC or bonds and get 5%, or stocks. Certain sectors are seeing multiples contract because of investment in bonds, and that's good for investors who can buy businesses at lower multiples. Inflation is hard on those who spend a lot of their income on food and energy, so inflation needs to get down to 2%.

It's the right time to be in bonds, because it pays a good income, and bonds and trading at a discount to their par value, which will result in a capital gain. Interest rates will stabilize and maybe decline in the coming year. Possibly, both stocks and bonds will go up at the same time.

Markets seem unconcerned about geopolitical risk in the Middle East (expecting more conflict). Advising investors to hold investments. Portfolio should be able to weather all economic scenarios. Selling stocks on fears is a bad idea. Buying safe assets like gold a speculative bet on direction of markets. Earnings decline is occurring outside of Big Tech names. Expecting decline in markets to occur within the next 1-2 years. Margin pressures will take their toll on corporate bottom line.

Do It Yourself Investors:

"Core & Explore" strategy involves "core" holdings + "explore" strategies with higher risk. Would recommend core holdings include ZEQT to get exposure to TSX. Canada Pension Plan also a good investor to mimic with REIT's and Canadian Bank exposure. "Explore" strategies might include dividend paying stocks to provide extra yield. 

Does society and government have a newfound love for large companies? 

Prior to COVID, one of the largest risks facing FANG names in our view has been that of regulatory intervention. Given that society has been able to continue to function through this pandemic in large part because of these large companies must place them in a better light post-COVID. This might create a newfound appreciation for large companies and neutralize one of the larger risks standing in their way.

Of course, there’s no concrete answer in the above questions, nor is it simply a binary answer. Further, what ends up being true can be less important than what ‘the market’ believes to be true. If the market thinks that governments across the world are going to do what they can to support economies and the markets going forward, this would have a big impact on how an investor views risk when investing in equities. In the future, governments may or may not be there to help out and there could be larger unintended consequences down the road because of such action. BUT, if the market views this type of support as lowering the risk in equities, this has big implications on valuations across the board. Put another way, should an investor begin to think that governments and other institutions will/should do all they can to neutralize future recessions? Whether or not they are always successful in doing so, should this backstop not almost certainly lower the overall risk in equities compared to history?

All of the above essentially comes down to whether the overall risk in equities is being lowered. If this is the case, lower risk means an investor is willing to accept lower returns. These lower returns are reflected in stock prices through higher valuations. Bottom line, no one knows what markets are going to.

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It has been one year since the October 2022 lows or optimistically speaking one year of the new bull market. We are seeing some rotation into other sectors and broader market participation. Tech is still OK but some companies are expensive. Sectors he likes are consumer discretionary, energy, tech & communications, health care. With consumer discretionary be selective. Health care tends to be more conservative with stable earnings and mostly decent dividends. He likes the strong growth names in this space.

Inflation is coming down from 9.1% last summer to 3.7% now. The U.S. consumer is pretty healthy and the labour market is quite tight. Earnings estimates look to improve over the next 12 months but there may be a couple of soft patches. Going back to 1950 the fourth quarter is one of the best times of the year for stocks. Also since 1950, the second year of a bull market (now entering) has always been positive with an average of 13.5% upside, out of 15 years of observation

Fixed income is providing returns of 4 1/2 to 5% returns. He likes shorter duration areas, both corporate and government but more so on the corporate side. Mid duration is OK too and if yields go down we will see a good lift in bond prices. He doesn't recommend long term duration bonds.

The question was asking about an ETF that tracks the 10 year treasury bonds. He mentioned UTEN and i-shares IEF which are both close to 52 week lows.

The question was on Global X Russell 2000 covered call ETF. The Russell 2000 Index was up more than this ETF: 5.2% over .6% for the ETF, so it can be better to own the actual securities over the covered call strategy. Also it has smaller cap stocks so can be volatile.

The question was on low risk ETF's. Try Powershare 1-3, (PFL) in Canada with short term floating rate corporate bonds and GSY in the U.S. for relatively low risk and a yield of 5.2%. You do not necessarily have to go to cash accounts. Investments savings accounts are another option.

The question was on buying a good ETF for her seven-year-old granddaughter. He suggested QUAL i-shares with low leverage, high returns and big name securities. Also VID in the U.S. with rising dividends. There are also Canadian versions. At this point you want stocks with more growth and good quality names. If withdrawals are needed for school you can dial back to 75% or even 50% at the 3 or 4 year mark.

We'll see a slowdown, likely a mild recession, though not guaranteed. Shallow and short, driven by the consumer who is definitely weakening, but has held up this long because the government gave so much stimulus. Meanwhile, huge infrastructure projects have barely begun and will carry the economy through the slowdown. Expect a recession on Main St, but not on a Wall/Bay St.

Believes economy is at the end of rising interest rates. Likely that within the next 12 months - US Fed will drop rates. Investors have been lulled into false sense of security. Preparing clients for when markets soften. Canadian Telco & Utility sectors have become under valued, and are presenting opportunity for investors. Structured Notes with higher yields offering investors big opportunities. Has been limiting exposure on service related companies (airlines, hotels, cruises). 

Weekly Market Summary:

US Consumer Price Index (CPI) in September comes in hotter than expected, which slowed to 0.4% month over month from 0.6% in August, but still slightly higher than the expectation of 0.3%. While oil prices surge on fears of Middle East conflict will put more pressure on oil supply tightness. The Canadian dollar was 73.2 cents USD. The U.S. S&P500 ended the week slightly up 0.8%, while the TSX was up 2.0%.

A lot more greens this week than reds. Energy and materials gained 7.1% and 4.5%, respectively. Financials added 1.2%, while real estate edged up by 0.6%. Consumer discretionary and consumer staples both added 1.2% this week. Information technology ended the week down 0.6%. The most heavily traded shares by volume were Tamarack Valley Energy, Baytex Energy, and Crescent Point Energy.
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