Market Commentary — Page 280

Market Commentary

COMMENT

The market has no memory. It plummeted yesterday because of fears that the US has lost control of Covid, yet markets gained today. Any time stocks get hammered it triggers a vaccine reaction in that good news will bail us out. In truth, a vaccine won't reach the masses until the spring probably. We're dealing with cross-currents. Rising cases spells a rough winter, though earnings are up (i.e. Cisco, Disney), a vaccine looks likely to come, and there remains a (rocky) transition to Biden. He expects positive retail company results next week.

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COMMENT

He's often asked how stock markets can rally so high as the number of Covid rises so high. He answers that business responds to the danger of Covid, like investing in PPP for employees or closing down operations. CEOs don't have the luxury of pretending that Covid exists, like Trump does. Trump is tweeting about the election instead of tackling the current pandemic. History will show that business stepped up in this crisis.

COMMENT

For now, markets and economies depend on cheap money and fiscal spending? Yes, US election and Covid vaccine were overhangs on the market, and now we have more clarity. But even with Pfizer's announcement, it's going to take a long time to manufacture and distribute. Virus will continue well into next year. We need, and have, global central banks being accommodative. In the face of a virus resurgence, a fiscal package is very important, especially to get small businesses, travel, and leisure through the next few months.

COMMENT

With the vaccine progress, do we now have a visible path to normality? You're right. Historically, vaccines take years. So the current fast track is unprecedented. Hopefully, by mid to late next year, the vaccine will be out in the general population. So the economy can start opening up and return to a sense of normalcy mid to late next year.

COMMENT

Is the market rally on the prospect of a Covid vaccine too optimistic? Doesn't think so. There are times, though few and far between, when you have to buy the gap higher as on Monday, yesterday, and today.

COMMENT

Will the valuations for big tech end in tears? Not sure of that, but we wanted to see tech take a breather and to see the rally broaden out to other sectors. Heavy lifting to year end won't be in the Shopifys. They'll be fine in the next couple of years, and you'll probably have an opportunity to pick away at them a bit lower. But when the value complex like banks and lifecos have a 10-15% move, and if you assume the economy will recover 2021-22, there's still a lot more for these value names to go.

COMMENT

Are you avoiding certain sectors? It's still a balance sheet issue. Vaccine won't be widely distributed for quite some time. Some sectors are in dire need of assistance right now, and even if they get it, balance sheets could still be worse off 6-9 months out. You could pick away a tiny bit at a Carnival Cruise Lines. But there's so much upside in names with great balance sheets, like banks, Enbridges, and Manulifes, that you really don't need to take on the extra risk to do well in this rally.

COMMENT

Not wild about real estate sector? High watermark for him to be attracted to REITs right now. Pandemic accelerated the retail trend, and started a new office trend. Competing for capital. Reminds him of the oil story of 2018. Likes REITs with moats, like the seniors ones.

COMMENT

Time to switch from tech to value? The script for a recovery centres on financials, industrials, and cyclical tech. Tech is expensive, financials are inexpensive, with industrials in between. Lots more to go in financials and industrials. Likes Magna, Finning and Methanex in industrials. Likes banks, insurance companies and US banks. Good to see some consolidation in tech. Amazon, Tesla, and Google still make sense on price to growth, and he's waiting for those to get cheaper.

COMMENT

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Another meltdown like we saw in March is very unlikely. There is stability in the presidency, more stimulus coming, low rates and earnings have been good. Many companies have prospered even in a pandemic. A split congress is also good for markets. Volatility is expected to a certain degree as investors adjust positions, take profits and rotate sectors. Unlock Premium - Try 5i Free

COMMENT

It's a win-win situation: you can buy the Covid as well as the recovery stocks. Both classes have seen pullbacks recently. Stay long on everything. HOWEVER, U.S. Covid cases are rising alarmingly; we're in the middle of a contested election; and there's no stimulus package yet. Too many Americans refuse to wear masks. Investors and Americans are being cavalier. These are potential dark clouds that investors must be aware of. Wouldn't hurt to raise cash.

COMMENT

If I have $2-3K to invest, what to buy? If you have under $10,000 to invest, then buy an S&P index fund. Makes sure it charges a low MER. (He didn't name a particular ETF.)

COMMENT

cap rate: For the last 2-3 years, the average cap rate in the US real estate was 5.5% vs. the 2.7% US treasury rate (3-year average). And now the latter has fallen to 90 basis points, so the cap rate is even more attractive. Apartments: The effect of record low interest rates is huge; financing rates for Canadian apartments in the last 6 months have fallen 100 basis points. Meanwhile, we're seeing record low cap rates in midtown Toronto. Retail: pre-Covid, e-commerce sales were already taking away from brick-and-mortar. Today, how can traditional retail survive? Be careful what retail REITs you buy. Office space: before Covid, businesses were already using less office space and will continue to be challenged even during the recovery. He sees less demand in the medium term.

N/A

Coronavirus vaccine. He's not surprised with the euphoric reaction to a promising coronavirus vaccine. He's surprised with the efficacy rate which is at 90%. It's a big breakthrough. There is some logistical challenges with distribution, but clearly it is great news. The stay at home stocks are selling off, and stocks beaten down are recovering.

N/A

U.S. Dollar Weakness. Overall, the combination of economic and fiscal policies globally should mean that the US dollar softens compared to the Euro and emerging market currency. The Canadian dollar has strengthened off improved energy prices. A sustained rally in Canadian dollar is not likely.

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

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

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

For now, markets and economies depend on cheap money and fiscal spending?(A Commentary)

With the vaccine progress, do we now have a visible path to normality?(A Commentary)

Is the market rally on the prospect of a Covid vaccine too optimistic?(A Commentary)

Will the valuations for big tech end in tears?(A Commentary)

Are you avoiding certain sectors?(A Commentary)

Not wild about real estate sector?(A Commentary)

Time to switch from tech to value?(A Commentary)

Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. (A Commentary)

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

If I have $2-3K to invest, what to buy?(A Commentary)

cap rate:(A Commentary)

Coronavirus vaccine.(A Commentary)

U.S. Dollar Weakness.(A Commentary)

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