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

Canadian vs. US banks When interest rates move up, US banks outperform Canadian by a mile. This is because their net interest margins are greater and because they're more leveraged to the economy. But when interest rates go down, US banks tend to underperform. Banks are out of their seasonality right now, so he's not looking at any of them.

Gold miners. Gold miners sweet spot of seasonality starts July 27 - early October. Sometimes a pickup happens earlier in June. June can also be very volatile for gold and gold miners. Right now, he'd wait on gold miners, even though a name like ABX just had some good numbers. Downturn in June may be a good entry opportunity. He'd pick gold over the oil sector.

FAANG continued to sell off today at natural resource stocks rallied again, but he won't give up on the tech giants. Very low interest rates and a once-in-a-lifetime boom has seen Facebook over 700% and Amazon nearly 1,600% over the last 10 years. Doesn't this merit something? Do we just forget these stocks? Throw them away to double-down on the cyclicals? Booms are great, but don't last. Eventually, booms bust and this one will one day face rising interest rates. That's when investors flock back to the likes of Microsoft and the other FAANGs. FAANGs are built to last and not sensitive to the whims of consumers, and they sit on a lot of cash to consistently reinvent themselves. For example, Netflix used to rent DVDs and are now a monster streamer.

He sees pockets of value and an abundance of growth amid earnings season. So far so good. Comps are easy vs. last year. The TSX will enjoy strong growth, and he sees good value in the market. We are set up for easy comparisons this year. A good recovery is under way. There's no denial there's carnage on Main Street where the situation is vastly different from the stock market. As for debt, yes, you can't spend money you don't have. Those who remember Canada in the 1990s know that big deficits lead to belt tightening and/or tax hikes. Someone's got to pay for this. Canadian banks looks attractive with robust earnings.

Lumber prices He doesn't own any lumber stocks. The current spot lumber prices are puzzling though he understands there exist problems in lumber supply while housing demand remains strong and people are bored, and so are doing renovations. Lumber prices are way, way too high, are frothy and will cool off inevitably. Not good for lumber stocks.

Market. It is a wonderful time because no body knows anything now. For the last year we had this COVID shock and then the markets almost doubled. If we are not going back to something normal we are going back to something new. You have to own the kind of stocks you want to own when you don't know what comes next. Worker productivity should increase in the next year. As a society we have not absorbed the implications of our ability to work at home.

Price of Oil. It has been surprising in all directions. Demand has already picked up and it will take time for supply to catch up to it. For all of the power we are generating we are eating it up in generating bitcoin or charging electric cars. Oil prices will continue to remain strong but Canada has to figure out a way to capitalize on it. We only have about 5 years.

Market outlook. It is clear that all the stimulus and central bank actions are responsible for the boost in asset markets. Powell hinted at froth in the markets. What the feds are doing is not solving inequality and structural problems.

Inflation. The large parts of the inflationary impacts are supply issues. The real question is on incomes. People must have a will to spend, but also wages need to go up. If this goes up, inflation will really go up. Employment numbers in Canada and US is really where we must watch. Feds cannot do much about it since if rates go up, the economy will collapse.

You cannot taper bond issuances, and contrary to this, it must be stepped out. The debt must be financed and this will push yields higher.

Precious metals as a hedge against inflation. Precious metals accounts for 2-3% of the market. 30% allocation would be too much. However, inflation will be an issue and gold could be a good asset class. It is personal how much you want to allocate.

Educational Segment. S&P500 companies have been reporting great earnings and most times, investors are selling into it. FANGs, Tesla and Visa are some examples. Selling on news is not a bullish thing. On the last two earnings of Apple, you can see that the stocks rallied up into expectations of good earnings, and then markets sold off for a couple weeks. Tech heavy NASDAQ will continue to weigh on markets. Market breadth is important to look at. Slowly, stocks are starting to break their intermediate trend line. This usually leads to a correction. We could correct 5-10%. Time to be more conservative.

Another record-breaking month should be turning bears into bulls, but it isn't. Tech rolled over today. Now, we'll subjected to talk that great earnings don't matter because we're at the peak and there's not enough money for all sectors to rally (which is true). Bears only see rolling over. Enough of that. You must own stocks now that the consumer is flush. Money will return to tech.