A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. People are worrying about interest rates and inflation. The growth rotation is fairly ugly with maybe 5% more in decline if 5i were to guess. Having a balanced portfolio with all sectors, including growth and value will help. Insurance, metals, materials and industrials tend to do well in higher interest rate environments. Unlock Premium - Try 5i Free
COMMENT
Market Outlook. We are seeing a divergence between what the indices are doing and what the average stock is doing. The major indices are dominated by a number of stocks. The stocks that moved that market off of the bottom, which were growth and tech, have been going sideways for the most part. You also have cyclical, resources and financial stocks are doing much better. However, since they only make up a small part of the index, we are now seeing this show in the composites.
COMMENT
Copper. Outlook of copper is very good. China is coming out of covid earlier than others and the demand is high. The renewable market requires copper too. There is also a supply issue due to the low historic price of copper. It will take quite a while for supply to catch up. Likes the mining stocks like RioTinto.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. There’s some inflationary pressure hampering renewables. There is also market rotation out. Rising commodities prices are putting pressure on all sectors. Unlock Premium - Try 5i Free
COMMENT
Tech stocks wobbling. Issues with valuation, especially on the software side, and this migrated into the semiconductor side. Some of the SaaS stocks are second-guessing themselves. Twilio's earnings last night are an example. The cloud side is doing well, and semis have recovered nicely. Earnings from the big mega-caps last week have made people wonder if it can get any better than that, and so they're taking profits. Next quarter is in July, and the concern is about comparables to the last quarter and to last year.
COMMENT
It's May. Time to go away? Market's still moving up. Part of the strategy is to move into defensive sectors. In March, the utility sector gained over 10% and consumer staples outperformed as well. That shows that investors are concerned. Lots of rotation going on. Over the next 6 months we probably won't see the runup of the last 6 months. Market's starting to get a little jittery.
COMMENT
Commodity trend and reflation trade overdone? Yes. Tech has suffered since last August, as investors have moved into the reflation trade. But interest rates have moved down again. Investors are still trying to find their footing. Cyclicals underperformed in April. Now money is piling back in, but he's not sure it's going to last, especially if interest rates start to roll over, which is what they typically do seasonally this time of year.
COMMENT
Historically, a weak season from May-October. Yes, over the long term. It was different last year, due to unprecedented stimulus and much faster economic growth than expected. Stimulus probably won't be ratcheted up again. Investors have moved out of tech and into defensives. The weaker season should start shortly.
COMMENT
If a stock's run up before its seasonality, can I still do the trade? The ideal setup seasonally is when there's a sharp correction before the seasonal period starts. Just because it's run up, doesn't mean you can't do the trade. But typically, it doesn't have the same conviction rate. He'd wait a bit closer to actual seasonality before stepping in.
COMMENT
Dividend plays and interest rates. It's the direction of the interest rate movement that really counts. If interest rates are moving up on a sustained basis, the dividend players usually underperform the market. Bonds represent a better relative deal. But also under those conditions, dividend growers tend to outperform those that have a flat dividend. Right now, dividend payers are a good place to be instead of the growth sector.
COMMENT
Interest rates for 2021. Market narrative is that rates are heading higher. But bond investors aren't buying it. The bond market is much bigger than the stock market. The 10 year has pulled back. From a seasonal basis, interest rates tend to moderate now. So he sees rates staying flat or going lower over the next 6 months going into October. Interest rates will rise after that as the economy reboots itself.
COMMENT
Commodities coming under pressure. The trade has been overdone. Look at lumber. The price has doubled since mid-March, but has demand also doubled since mid-March? Lots of speculation taking place, including in copper. The reflationary trade says we need more copper, but the trade is overdone. Commodities like lumber and copper will pull back.
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