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

Inflation. One of the risks to consider. We might see 2% inflation, but not excessive. Bond yields have calmed down. Another bump in the road would be if the Covid variants get out of hand. Rapid vaccine rollout in US and parts of Europe will help the reopening trade and cyclical stocks. Though we're not feeling it here in Canada yet.

Canada or US now? Has been overweight US for many years. Now it's time to look at Canada and internationally, including Asia and Europe. In Europe, it's value and financial stocks. You can't beat the depth and breadth of the companies in the US, but now's the time to look beyond.

Which US bank to buy? US banks are great, one of the top performing industries in the S&P. Focus on valuation, trading below or near book value like WFC, Citi, and CFG.

Fears of real estate crash in Canada? There's been talk of this for a very long time. You never know when this will happen. Looking at price metrics, we're right up there. We might have a small correction. But he wouldn't avoid banks or lenders on this basis.

Hedged vs. non-hedged ETFs. Right now, with the CAD at 79-80 cents, he'd prefer to be non-hedged. Hedging is more expensive. CAD range is 70-80 cents. To take out the risk of long-term currency fluctuations, you can go hedged, but you may not get the upswing of the USD going back up against the CAD.

Hybrid, a world where stay at home habits have some staying power, but we'll still be going out during the reopening. Don't bother guessing what consumers will do with mass vaccinations. Instead, stick with good stocks on both sides of the trade. A hybrid economy. Like JPM's CEO said today that he expects a mix of workers staying at home some of time and returning to the office some of the time.

People feel confident, especially in the US where vaccinations are accelerating. Recent data is very positive. Q1 exceeded expectations. Whether we see a full recovery in services later this year is questionable, especially in places like Ontario. But rates remain relatively low and stimulus helps. Healthcare is a good place to be now, though pharma tends to get beaten down historically. Health technology is especially good. Elective surgeries, down during lockdowns, will grow going forward. Covid vaccines proved how quickly companies can bring them to market, how we can solve medical problems a lot faster.

Market. Market. We are seeing signs of the real economy roaring back. He thinks this cycle has room to run. Think about the re-opening trade, the back-to-work trade and away from the work-at-home trade. Don't throw out babies with the bath water. It will not likely be like the 2008 to 2019 cycle.

Copper. It is a pro-cyclical commodity. He likes it and has exposure in his US portfolio. It went on quite a spike about 2011 because of rapid industrialization in China and then fell back. In 2016 it rallied again. He does not think electric vehicles will get us a $20 price but it suggests being in the upper part of the range $2-$5. There will be a higher demand as we move to electric vehicles.

Jobs are coming back. Unemployment numbers in Canada are coming this week. There are a lot of positives that the market is celebrating. However, who is going to pay for all this stimulus? Right now, markets are okay and it should continue for the next 4-6 weeks. Valuations are problematic but some times the market doesn't care. Vaccine efficacy is positive.

Tax hikes and corporate tax hikes are coming. Funding gap is more than $2 trillion. This will suck a lot of money out of the capital markets. Liquidity is also a factor.

Crypto. Wouldn't recommend for the average investor. However, if you are going to invest, invest in the TFSA so you don't have to pay taxes on it. Good for speculative plays.

Bond ETF. Bond funds have interest rate sensitivity risk, duration risk. It is different from doing a laddered strategy yourself. The world is so sensitive to interest rates so bonds will be a bad investment for a while. A traditional 60-40 balanced portfolios will see stress. It will be a problem for the next couple decades. Central banks will probably continue to monetize the debt.

Educational Segment. Earnings season is starting next week. Markets will be focusing on the earnings. S&P is now up to $174/share. With the S&P over $4000, the multiple we pay for the earnings is getting pretty high. The multiple of the market should be 16.5x, which is fair value. If we use a multiple of 20x, you get a $200/share number. Before covid, for 2021, we were expecting $200. Now 2022 expectations are at $200. The earnings are discounted into the future. The markets are expensive here. May will be interesting and we could see selling into strength.

Buy everything except the stay at home stocks, which is what happened today. We just saw blow-out jobs numbers. If everyone is vaccinated, we may return to record-low, pre-Covid employment levels, unless inflation spikes. These record highs have come at the expense of the stay at homes, which may see a comeback. But he thinks a slowdown won't happen. Meanwhile, he sees an uptick in index funds, which help lift FAANGs which are part of them. It's strange to see low-wage inflation now.