Investment Q&A

Q: Hello:

I would like your opinion, in general, about commodities and their path forward, especially precious metals and oil. At what point are we in the commodity cycle and what is the timeline that you foresee for it? Do you have any specific predictions about oil and metals? Thanks. Flo

Q: Jennifer Gauthier in the Globe presented an article indicating that some of the key drivers of consumer price growth are declining. ie. oil (WTI) drops below $100, wholesale gas price drops 7%, lumber prices are a fraction of their pandemic peak, freight rates on major shipping routes have fallen 40% since September 2021 but remain a lot higher than pre-pandemic rates.

By contrast, Eric Lascelles Chief Econ. At RBC Global Asset Mgmnt. is quoted as saying that inflation has spread to a wide range of products rather than just a few key drivers and he believes that inflation has not yet peaked.

I have a few questions after reading it.

Do you agree with these assessments?

I suppose the way to know that inflation has peaked is to see it drop. Would it be unlikely to rise soon after once the market signals it’s peaked?

At the peak, do you see any sectors rising quicker than others?

Do GIC rates quickly start coming down once the peak is signaled?

Q: Hi all,
I feel right now like playing Sleeping Beauty. To sit tight on my choices, ignore market moves and wake up in few months. Mind you I already sold some stocks for profit or loss, but no rush to buy back. Breathe, enjoy summer, friends and family. All be well. Waiting for the Prince, Denise.

Q: Since I have no interest in fossil energy stocks and don't need Real Estate stocks since I hold properties. Where should I overweight to get a decent weighting in other categories?

Thanks

Yves

Q: I hope the 5i team and readers enjoyed a nice holiday weekend. Looking ahead to the second half of the year, what do you think we’re in for with the markets? I realize prognostications are hard to make (maybe I should say they are easy to make but hard to get right!). I get nervous because I keep seeing more doom and gloom forecasts which reference the tightening of fiscal policy in the US and ongoing inflation. I would appreciate hearing your general comments at this time. Thank you.

Jason

Q: Hi 5i,
There is a lot of doom and gloom around the potential for a recession. Do you feel that the market has already priced this in? I am hesitant to deploy additional capital in advance of the government confirming a recession which could result in another steep decline.

Would the confirmation of a recession happen on a specific date (i.e. at a specific time in the quarter?)

Q: My portfolio is split about 50-50% in C$ and US$. Over the next few years I'm bullish C$ (and A$) and bearish US$ but think shifting to something like 75-25% is risky if I'm wrong.

In this scenario does buying an ETF such as FXA with some funds in my US$ account make sense as a partial hedge against the US$? Any other strategies you could suggest?

Q: It appears that pre-1984 the P/E ratio of the S&P 500 could go below 10 at times (not clear on what measure -looks like trailing earnings), apparently in recessions. But since then, no sub-10's. Is there a reason we may now be in to a new era of P/E norms ie well above 10 and if so for what reasons? If we were to go down there now that would be pushing a 35-50% drop from here, depending on what P/E measure ( and much further if earnings are adjusted down). Also, Josh Brown (CNBC) pointed out this 9-range P/E ratio in recessionary times as in if we get a recession look out below--any comment on his comments?

Q: Can you pls explain why China has only 2% inflation, while the US has 8% inflation!?..if so...why are we all not buying Chinese stocks?

Q: Hi There,
Can you suggest a method where one can estimate the realtime Equity Risk Premium for US market and Canadian Market using ETF's. Can you also give a guide as to what values may cause investors to shift between the risky asset and the safe asset for US and Canadian markets. Thanks

Q: Is the time for buying longer term bonds, like SHY or even TLT coming closer?
Thanks

Q: Waiting for the other shoe to drop..." Your comments in the last update. Is there formal or informal talk that China maybe in "lockdown" for their own political reasons and to advance their cause in the world? What is your opinion on what is going on with China and Russia, could this be a co-ordinated effort to weaken the "free" world ? Thank you for any input you can provide on this topic.

Q: I am relatively new to investing and started when the pandemic began. Since I started I feel like my learning has been like drinking from a fire hose. More of an education question: now that inflation continues to increase and central banks do what they can to slow it down, I am wondering under what conditions do central banks start to look at reducing interest rates again. I have never been through any of this before so trying to get a better understanding, especially as I look to buy a house at some point.

Q: On a 1 (unlikely) to 10(very likely) scale how much likelihood do you place in recent predictions of people like Michael Burry and Jeremy Grantham that this is just the start of the bear market, and that markets could drop a further 50% from here?

Q: Is there a reason that the vix has currently not spiked more? Does not the current market warrant a good panic? Thanks.

Q: In your latest report (6-17) you state
"the main three forces that we have seen across rising commodities prices are adverse weather conditions (drought), the Russia-Ukraine conflict, and concentrated country risk"
However you failed to address perhaps the most significant cause of inflation which is the Fed money printing.
Why is that?

Q: Hi Peter, Do you think so called July hike by Fed and recession fears are already reflected upto some extent in today's market ?

Q: Hi Ryan,
Several years ago I engaged with 5i for a portfolio analysis. I'm a recently retired investor. 5i strongly encouraged me to include a fixed income component to stabilize portfolio fluctuations and lower volatility.

With that advice and for tax purposes I purchased XBB, CLF, and PMIF into my RRSP. Now that the interest rates are marching steadily upwards I'm in a significant capital loss situation on my portfolio's bond allocation.

At this point do you suggest I just hold through the cycle and absorb the loss or should I sell and reallocate funds? Perhaps into some solid Canadian dividend payers? (eg. GWO?)

As always, much appreciate your advice and guidance in these unprecedented times. Thank-you.

Q: Everyone, well the feds raised rates and will raise again next meeting. Are the rates increases what the market was looking for? Clayton

Q: I was listening to Ross Healy on BNN Market Call this morning, and he thinks the NASDAQ composite could drop by 75-80% off its peak. I also saw a headline on the same show whereby a Manulife survey indicated that 25% of homeowners would sell their homes if interest rates continue to climb upwards. Can you comment on the historical relationship between stock prices and house prices? For example, if stocks tank, will house prices follow downwards? Or if house prices drop significantly, can we expect a major market sell off?