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

Remains bullish on markets. Markets have had consistent gains since October 2023. Markets appear to be strengthening outside of big tech. Companies with high dividends tend not to growth as much - would rather slow & steady dividend growth (to keep up with inflation. With rising interest rates, important to screen companies that are sensitive to this. Energy, materials & industrial sector's are presenting large amounts of opportunity (Price/Cash Flow very low). 

Last minute push extended markets to record highs on Friday (May 17). Next week will present upcoming earnings, and will be indicative of economy. Many companies outside of "Big Tech" are reporting record earnings - which means strength in economy is extending past tech. Retail blue chip stocks like Target & Walmart are looking strong as well. NVIDIA earnings report next will is what everybody is waiting for. Indicates strength in generative A.I. & accelerated computing. Chips from NVIDIA are stronger than anything on the market - so in some ways, company deserves valuation. However, expect volatility from NVIDIA - would advise investors to "own" the stock rather than trade it. Bottom line is that lots of upcoming earnings coming up. 

Market Update:

The Producer Price Index (PPI) in the US rose 2.2% in April, coming in line with market expectations, indicating rate cut may eventually come as inflation gets back to the target level. In addition, the US inflation eases as the consumer price index (CPI) rose 3.4% in April, in line with expectation but down from 3.5% last month, marking the smallest increase since 2021. The Canadian dollar was 73.5 cents USD. The U.S. S&P500 ended the week up 1.2%, while the TSX was up 0.3%.

It was a mixed week of greens and reds. Materials rose 2.6%, while financials and technology gained 0.5% each. Consumer discretionary edged up by 0.2%. Industrials slid by 1.3%, while energy and real estate gave up 0.8% and 0.3%, respectively. Consume staple ended the week flat. The most heavily traded shares by volume were Tilray Brands, Fission Uranium, and Bitfarms.
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Everything's great right now in equity land. Market's are at all-time highs, with pretty broad-based strength across the board. Stick to the winners and let them run. Market's a bit expensive if you look at the PE ratio, but that's driven by the dominance of the Magnificent 7.

Under the surface, lots of value. Interest rates have peaked out. Profit margins and earnings margins are going higher. That's a healthy market, and we should see it higher by the end of the year.

It always comes down to the valuation on the stock. Earnings are what drive the stock. As long as PE ratios are sticking within historical levels, he'd keep holding as long as the earnings outlook is good. 

Inflation is starting to come down. Weakness is starting to creep into consumer spending and the labour market. Ultimately, that's what the market and the Fed want to see. Powell was right not to talk about rate hikes, the focus should still be on cuts. When those cuts come through, they'll drive a rebound in the consumer.

Know the companies you own really well, and allocate capital appropriately as you navigate the markets.

Doesn't think so. Real estate was so challenged, and now it's starting to rebound. Speaks to healthy growth. Utilities are responding to the rate trade, one of the weakest sectors in last 18 months.

GOOG is the leader in the AI space by far. META is an up-and-coming challenger. AAPL gets left behind when it starts licensing other companies' technologies, such as OpenAI.

The longer the bond term, the longer the duration, and the more exposure to interest rates moving up and down. A longer-term bond will likely outperform in a falling rate environment. Not averse to this plan, but better opportunities even at 3.5-4% mid-term bonds. 

You can also get 6-7% on some equities, but it does depend on your time horizon and when you might need the money. If your timeline is 3+ years, a company like ENB or POW would be a better place.

Yes. A lot of eyes were watching this. Yesterday's PPI wasn't terrific. Last few months of data points have been rather sloppy, pushing back expectations of rate reductions. Today went a long way to alleviate some discomfort that perhaps we're not going to get a rate cut in September, but the Fed will probably do one by December. 

The other really important thing is that Chairman Powell dismissed any sort of talk about rate hikes. We're going to be here for a bit longer, but we're going in the right direction.

Very positive. Seeing yields come down, earnings expectations from analysts are going up, market breadth is returning in a big way. Everything's suggesting that we're really in a bull market.

Always a possibility, and one of the reasons why you're not in 100% equities. But the market doesn't seem to think that's happening. Market breadth is really increasing beyond the Magnificent 7. Usually you sell in May and go away, but the opposite is happening.

Market's saying soft landing, and less likely for stagflation.

If you have USD, save it for things you can't get in Canada. You can get many names with CAD, and you don't have to tie up US dollars. He believes CAD has more upside than downside over next 5 years, so CDRs take out the currency risk. CDRs let you get a piece of the action on expensive stocks more cheaply. 

They are hedged, which is part of the charm -- you get the movement as though you're agnostic to the currency. There is an MER, but if you own for 5-10 years, that cost is diminished.

Probably the latter. What moves markets is things that aren't known, and this is really known. The Canadian yield curve is inverted, instead of up and to the right. This is because the Canadian economy is not robust, and we are so indebted. Lots of people were caught the wrong way on the direction of interest rates on renewals.

It will hurt the Canadian economy. But not the stock market in general, because it's tethered to global growth and what's happening in the US. A lot of Canadian companies can do very well under that framework.

Stock market feels strange as many stocks rising that don't usually correlate. All major stock indexes are at record highs which is defying conventional wisdom. Many investors and pundits are vexed as to the reason behind market strength. Currently "the bears" are very wrong, as strength in markets keeps going. For example, commodities and utilities are rising at the same time. Another rule of thumb - FANG has strength while other sectors fall - is not coming true. It appears many groups of investors are converging (tech/growth, hard assets/value). However, many investors are skeptical - believe consumers will tap out eventually. If interest rates are cut - will further boost economy. Bottom line is that the bull market is an amazing phase (even if investors are wrong).