Investment Q&A

Q: A conundrum....
As with most investors, I have winners such as 'ATD', 'CSU', ';TFI' and 'WSP'. Because of this delightful phenomena, they now represent a much higher percentage of holdings than they did at purchase. I am reluctant to admit that I also have 'losers' such as 'ECN', 'LSPD', 'GSY', 'TCN' and 'SHOP'. Obviously their portfolio percentages are much lower than at purchase. I eschew selling winners, so please help me out in terms of re-allocating the broad spectrum of stocks, i.e. sell fractions of the 'winners' and average down on the 'losers'?

Q: It looks like FED and BOC will keep on rising Interest rate and recession will follow,reducing income for many companies and their stocks will go down like in last recession. This is how I think,what is your opinion.2022 has been a tough year and hope for 2023 is in question.

Q: Peter; What did I miss this am. Markets are up across the board- ( except CTS ) did inflation drop to 2%? Haha. Rod

Q: Hi Everyone at 5i!! Today was a good day in the markets, but I can’t help but feel that we have more head winds coming our way. David Rosenberg says that this is a bear rally and we are headed lower. Your thoughts??? Cheers, Tamara

Q: On the question of US inflation, I'm a bit puzzled as to why more isn't made in the media of the recent monthly cpi data and that instead the focus seems to be on the annual cpi for the last 12 mos.

The following are the percentage changes for US CPI for each of the 12 mos ending Sep 2022 (starting with Oct 2021 and ending with Sep 2022, unadjusted for seasonality):

0.831% 0.491% 0.307% 0.841% 0.913% 1.335% 0.558% 1.102% 1.374% -0.012% -0.035% 0.215%

Looking at the last 3 months, inflation would indeed seem to be well under control given 2 of those mos show deflation. And this is using the Fed's preferred metric. Even the positive Sep figure annualizes to only 2.6%.

One hears much criticism of the Fed for not using current real time non-cpi data and that current inflation is really lower than the 12-month cpi and yet just looking at recent cpi data would make the point.

Also interesting is that according to one article economists are predicting a 7.9% US CPI print on Thursday for the 12 months ending Oct 2022. This would require an Oct 2022 cpi print for the month of 0.51% - quite a hike from recent months.

Any idea why there is not more consideration of recent cpi data, at least by talking heads if not the Fed? Thanks.

Q: Dear 5i
From what i`ve read over the years , it is my understanding that for every 1% increase or decrease in interest rates there is a corresponding 10% increase or decrease in bond prices . Is this generally accurate ?
If so would it be advisable , once it is believed that interest rates have peaked , to purchase a bond ETF ( with longer term holdings ) ? If so what would be your bond ETF of choice ? That being said if interest rates have indeed peaked it would also be favourable for stocks as well . As such i suppose the best scenario is the add to both with new money . Do you agree ?
Thanks as usual ,
Bill C

Q: Hi Team,
For this question I will reference TWLO, and Unity but really this is more of a general question. Unity used to be a past favorite. Now it seems, that 5i and the rest of the investment world is so negative on it. I am an investor in both these names and have been killed on them so far. Both were bought with a long term view in mind and both were considered at one time to be at the "heart" of future tech in their niche. Unity with the 3-D tech in gaming and other applications, twlo with its digital communication of things. Has this story really changed? Is it worth dumping these names now after 80% haircuts? In 10 years will we look back and say, Dam! Why was I selling these names and not buying? (oil stocks 2 years ago) . I note that Cathy Woods continues to buy both Unity and Twlo almost daily. Today she loaded up after Twlos big sell off. Same with Draft Kings. If she's buying them they must be considered on the forefront of future tech according to their firm. Not sure what her credibility is like these days due to the downturn, but at one time I thought her research was pretty good. Shes doing pretty much the opposite of the market right now. Who will be right in the end? It seems she will either be a hero at the end of this, or her funds will be toast one of the two. The market is a brutal place right now in the Tech sector and very frustrating. It's painful to watch the same analysts now dumping names where only a year or 2 ago they were praising the companies as innovators and pumping them for their future prospects in a growing digital world. It's not a wonder why people get to hate the stock market and trust no advisers. Some say big firms on wall street almost orchestrate this kind of thing, flushing out the little guy scooping up their shares so they can buy them on the cheap, knowing down the road they will make a killing when momentum shifts. (Conspiracy maybey, but sure seems to happen this way over time). Your thoughts on things as a whole would be appreciated. Thanks!

Shane.

Q: It seems like everyone is dumping technology and piling into energy. When energy was dirt cheap hardly anyone was recommending and that was the time to buy rather than high flying growth stocks or highly priced renewables. Is the same thing happening here where clearly technology is not in favour and everyone is selling to buy energy as that is the only thing working. Isn't this the wrong way to look at things as you are selling technology low and buying energy high. Your thoughts appreciated!

Q: Hello, Can I get your take on how the markets react during a recession? It seems we are heading into a recession in 2023. Do markets drop further? Do company earnings drop? What sectors if any do you see doing okay during a recession? Do I hold off on buying stocks till middle of 2023 and just stick some money in short term gic/treasury bills? Trying to figure out how to prepare my portfolio for a recession. Thanks

Q: I'm seeing many S&P500 companies and FANG stocks at prices we haven't seen for a while.
I've been hesitating to buy because the CAD dollar is so low and therefore a big loss in the exchange rate and fees.
Am I wrong in hesitating because of this? Also would buying a Canadian ETF that covers the above stocks be a better way to go?

Thanks, Paul

Q: IF the tech sector has had its day (decades) in the sun and will not outperform coming out of this bear market, what do you think will outperform instead? Next 10 years or so.

Q: Into the last quarter now for 2022. Should we sit on our hands and wait out the tax loss season selling which could be harsh, or has much of the selling already occurred?

Thanks for your thoughts.

Q: With the current rate rise most likely near the end , isn't it normal that the income stocks rally first?. Thereafter if the feds relay a slight slower change in the rates adjustments, the tech stock take off?

Q: In today's Larry Berman's BNN Educational segment, he referenced last Friday at 8:52 am...when the US Fed announced a "pivot", whereby they would probably raise rates by 0.75% this week but that they might slow down the rate hikes thereafter...my paraphrase wording.

Your thoughts and/or reaction?
Thanks...Steve

Q: I know that you feel now is a time to dip back into the market as most blue chips are down 25% and more and growth stocks are down 50 to 80%, but with the FED still raising rates maybe another 1.5%, would it not be wiser to not fight the FED and wait. I cannot see the markets going up until these rate increases stop.
Thanks again.

Q: Generally which size companies provide the best returns after a decline we have experienced,?
All of the above 3 companies ( small, mid, large cap ) are well run with good financials and should be able to ride this out. Is the small cap story played out with investors staying away for a protracted period ? Are mid caps are of the right size to be seen as safer, more liquid,? Are large caps just too large to grow ?
My question is not on these specific 3 companies but is more general in nature as to where to look for best rebound returns. Thanks
Derek

Q: In pass recessions how has stock market performance been, % up or % down?
Thanks again

Q: With what has happened with the market and what we might be looking at in the next months or year or so, if you are not in the market, would you invest now or just sit on the sidelines and let this whole mess play out and enjoy your cash?
Thanks again.

Q: Hello Peter, Ryan et al:

I know you have answered this question asked by different people! Still, here is a repeat! If only to clarify some of your previous answers.....

How do you differentiate between Bear market rallies and the onset of a new Bull market after a period of correction? Many seasoned pros including some wise old folks who have been around, both Technical and Fundamental analysts, seem to say that the bottom isn't in....yet! Thee will be capitulation. Wait and watch.

As a true subscriber of this newsletter, I have funds allocated in different baskets. However I know that I have to move some of my cash positions if I want to benefit from the new Bull market. Hence this question.
Many thanks.
Mano

Q: Hello 5I,
Just heard a talking head say it could take 10 years for the Nasdaq to recover as it did in 2000. Thoughts? Seems to me that was a crazy bubble and maybe this one a small one? Appreciate your opinion.
Thanks