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

Inverted yield curve. Short term rates are high relative to long rates. But it's inverted even short term vs. short term, so 12 months vs. 3 months. Lots of the yield curve indicators are inverted or close to it, which is usually a precursor to a recession of some kind. Bond market is screaming that we've tightened enough. He wants to see how that translates into the economy, earnings, and profit margins going forward.

Gold. Starting to pick away at some of the names in the gold space. In this environment the USD has been very strong, but it's backed off a bit and that's been positive for gold. As real yields start to come down, gold is looking attractive.

Fixed income. The fixed income market looks quite attractive now. A slowing economy is going to be a tailwind for bond prices as yields come lower on the middle side of the curve, maybe 5-10 year government bonds, which are looking very attractive.

Markets. Great 4th quarter rally, with S&P up about 15% from the October lows. It's a bit of a stealth rally, where no one really believes the market moving higher is real. If anything, people think it's a bear market rally. With inflation, which is the main worry, hitting an inflection point, it's allowing markets to look ahead and move higher on seeing a better macro picture going forward. Sees Fed and other central banks pause in 2023, and perhaps pivot later in the year. That's good for equities. Seasonality sees the fourth quarter typically strong for equity markets. Since 1950, there's never been a negative 12-month period following mid-term elections. Year 3 of the presidential cycle is the best, averaging a 16.8% return. 89% of the time, year 3 of the presidential cycle sees positive markets.

US Congress. Bit of a gridlock with Congress being split, so no real chance of extreme policy shifts. Equity markets like this sort of split in power.

Higher interest rates and insurers. Higher rates are helping them for sure. But they're also a bit more defensive within financial services. Financial services have been outperforming the S&P for the better part of this year.

Commodity super-cycle. For cyclicals, there are times you want to be in them, and times you want to step away. He thinks we're at the beginning of a new commodity super-cycle. Catalysts for commodities include China starting to grow quickly again, and in general the value of commodities is cheap. Seeing that inflationary effect. Though they have come down this year, he can envision a scenario where they go higher over the next 5-10 years, especially for the energy and metals spaces. Limited supplies, finite resource.

Typically, the market will respond to strong or weak Black Friday numbers. These days, bad economic news means good news, because bad news means the Fed will slow its rate hikes. Yes, seasonality says that markets will move higher. We're in a grace period between the time the Fed raises perhaps 50 basis points in mid-December and the time when we see Fed actions (of this year) have an impact. Yeah, there could be a year-end rally, but then we hit reality after that when earnings come down meaningfully and valuations get too high. He's fairly invested now, but doesn't expect to make a ton of money between now and the end of the year.

He expects capex spending by companies now to slow down. After all, in few recessions do industrials do well. Investors have gone out of tech and moved into industrials, another liquid space. He doesn't see industrials enduring a sustainable cycle during a declining economy.

The US market (S&P) ends 2022 not down 26%, that would be a massive victory. This year, we have digested a ton of bad information, including valuations, Fed moves and remarks and corporate earnings.

The US market (S&P) is rising towards the 200-day moving average because the street feels the Fed will moderate its rate hike to 0.5% in mid-December (and not 0.75%); technicals point to a 200-day MA; and seasonality after the US midterm elections. Don't get overly excited or pessimistic about the economy.

volatility isn't spiking now That's a good thing, because the street perceives there's less uncertainty in the economy path after extreme hikes in interest rates this year. She does not expect stocks to spike in early 2023. Aside from rates, the street perceives a peak in the strong US dollar, which is fuelling markets. A stable, range-bound dollar in 2023 could be a catalyst for risk assets.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. REIT Conclusion: REITs offer investors a great method of gaining exposure to the real estate sector while also benefiting from capital appreciation of property values and stable cash flows. The business activities and operations of a REIT differ from that of traditional stocks, and as a result, it is important to know which metrics and ratios to use when evaluating these companies. REITs are debt-heavy companies, and because of this it is essential to look at a REITs liquidity (are its debt levels too high? Is it able to generate enough cash flow to service debt payments?) and whether its distributions exceed that of annual cash flows (is AFFO payout ratio above 1.0X?). We hope that this introduction to analyzing REITs has been helpful.

This is traditionally the strongest period for the markets. The gains in energy and finance could create disparity with volatility in other areas that have done poorly this year. The prices of some small and mid caps have fallen a lot but the businesses they run have done well. Some investors will just take their losses and move on and maybe buy back later. Many investors are exhausted from this past year and may just capitulate and go to GIC's.

Believes markets heading into a recession in 2023. Heading into a seasonally good time of the year for the market (historically). Markets tend to trend up during the 4th quarter. Believes market indexes (S&P 500) are approaching levels of resistance (4000 level). If S&P 500 rises above 4000, will indicate bear market is over (not seeing that yet). Not a believer in Crypto currencies and believes most of them are a ponzi scheme. Crypto currencies are not a producing asset (pure speculation). Major institutions not investing in Crypto, thus preventing prices from going higher.