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

Yes. Seeing a bit of a pullback from the most recent high towards end of March. April hasn't been great, and so far May is not off to a great start. 

Probably positive for the medium- and long term. A bit of a cooling off period for some of these stocks to come back, as they were over-inflated. A time when you can do some buying and probably do pretty well on some names.

Yes, that area is not his preference right now. For the most part, earnings have been good. AMZN came through with solid earnings last night, GOOG was good last week, META not so great the week before. But overall, both the earnings power of those names and their ability to cut costs exceed some other companies. They'll be benefactors of a strong market rally, hopefully sooner rather than later. 

Yes. Primarily because technology in a slow-growth environment will typically outperform. There are different tilts to growth or value throughout the economic cycle. Right now, his preference is to tilt towards growth-oriented stocks. This traditionally takes you more towards US markets and tech names.

You need to have medium-high risk tolerance to own names in this space, as they have more pronounced swings.

He just boosted his exposure to energy, now owning 13 names. If oil continues to trade at $65-85, that's perfect for the oil stocks though, yes, there could be pressure on these names. He just boosted his exposure to financials from 8.8% to 23% over a year. This includes regional banks.

Is critical of Ottawa's latest tax changes, because it disincentivizes wealth accumulation and entrepreneurship, those who creates jobs. This will encourage flight risk.  Canada is seeing slow economic deterioration as unemployment and credit card defaults slowly increase, but there is no major systemic risk or irrational moves in the stock market. The U.S. is in a much better economic space with a strong consumer. He expects some, but not substantial interest rate cuts. Meanwhile, the Canadian government is spending which is inflationary.

He expects further upside for the stock market will be limited due to a few headwind concerns. Economies in many countries are weakening. The U.S. consumer has been running down their savings. However he would be a buyer on further weakness. He feels that the next direction of interest rates is down since inflation is moderating although there are some blips at times. Rates decreases may not necessarily happen soon. The wealth effect of the market going up is much higher than decades ago.

The question was on life insurance stocks. He would lean towards the banking sector which has better valuations. However he is underweight in the financial sector with expectations of a weaker economy and a trend to lower interest rates.

US corporate earnings strong last week - tech contributing majority of growth. 5% grow with tech sector (~1% without tech). Markets have been stable with higher than expected earnings. Recent US Treasury announcement a concern, with rising debt levels. US bonds selling off slightly which creates uncertainty. Old US Fed bonds maturing will require new issuance of debt - very eye popping. More bond raises will draw capital of out other sectors of economy (harder for companies to raise capital from investors).  

Alexander Hamilton (first US Treasury Secretary) suggested prudent use of leverage was good for society. However, politicians have abused debt in order to buy votes. Rising debt levels in the USA a major concern. Every recession in the past 50 years has followed with record debt levels. Current deficit comprised of 6% of GDP is set to rise. Fiscal outlook for US Fed is in terrible shape. Approximately $1 Trillion of debt expected to be raised by the US. US Fed competing with private companies for capital - investors will give their capital to government - which reduces amount leftover for entrepreneurs etc. Higher inflation will also require increased interest rates, which will increase the costs of servicing debt (money that could be invested elsewhere). Overall, is bad state to be in with colossal debt levels. 

Company Highlight: Prime Water Corporation (PRMW)

The second best performer was Prime Water Corporation (PRMW) whose stock price was up 12% on the month, 24% YTD and 24% over the past year. It is a leading direct provider of bottled water to consumers and water filtration services in North America and Europe, having withdrawn from Russia in the 2nd quarter of 2022.

The low for the stock price during the  past year was $16.58 in mid June 2023 from where it rose strongly  near the close to $24.64. The stock ranked no 3 performer in August 2033

Management notes that 2023 was a year of transformation and strong financial performance. PRMW continued to execute against its transformational strategy to become a pure-play North American company, achieving a major milestone as it completed the sale of a significant portion of the international businesses. On December 29, 2023 the European business was sold for $575 million. This plus cash on hand enabled PRMW to redeem in full $750 million of 5.5% senior notes. Cash on hand at year end was $507.9 million

Year end results were announced on February 28,2023: Revenues at $1.772 billion up 4.7%; net income at $238.1 million was up $208.5 million, of which $174.3 million came from discontinued operation.
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Cautious on state of economy. Similar to past economic cycles when markets crash. Yield curve has been inverted for a long time. Longer the inversion occurs - generally the worse the recession is. Believes investors should take preventative measures. One strategy is to diversify into a broad variety of asset classes (gold, real estate, stocks etc.). Unsure on the future of markets, so would recommend defensive portfolio. 

April Market Update:

The US treasury yields advanced strongly due to the escalation in Middle East tensions between Israel and Iran, putting pressure on the global equities market. On the other hand, the US economy grew at a 2.5% annualized rate, a slowdown from 3.4% last quarter, falling below the Fed’s estimate for the first time in two years, posing a dilemma of slow growth and high inflation. The Canadian dollar was 72.95 cents USD. The U.S. S&P500 ended the week flat, while the TSX was up 0.2%.

It was a mixed week of greens and reds. Consumer staples rose 2.9%, while energy and consumer discretionary gained 2.0% each. Financials added 0.6% while real estate edged up by 0.5%. Industrials slid by 0.8%, while materials gave up 0.3%. Technology ended the week flat. The most heavily traded shares by volume were Bank of Nova Scotia, Royal Bank of Canada and Kinross Gold Corporation.
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Yes. He heard a speaker last week, who defined risk as what remains after you've accounted for all the risk you can think of. 

There's quite a bit of risk in the world right now with respect to geopolitical disruption. Conflict in Middle East is escalating instead of abating. The invasion of Ukraine is in its third year now and going strong. US election year, and a lot is riding on those results. 

Canada, relative to the rest of the world right now, is economically and politically stable. Inflation's coming down, so the bite of higher rates is beginning to take effect. At around 16x earnings, valuation multiples of the TSX continue to be very attractive relative to many markets around the world. Whereas the S&P 500 trades at about 22-23x earnings. TSX has a great yield of about 3.1%, compared to the S&P 500 at less than half of that.