Investment Q&A

Q: Everyone. AI is at the beginning of a great breakout in many industries. AI is in exponentially growth period and the early adopters will benefit but the biggest beneficiaries are yet to be identified. I didn’t understand the benefits of MSFT or APPL in their pre-real growth stages. Will AI change the stock market in a profound way the humans will not be involved ie the human stock pickers. What tech areas should I look for be looking for or are they in my view already? Should we believe in the large cap tech stocks will continue to lead, or buy, the AI technology revolution? Clayton

Q: A touchy question for sure. How much does the market follow "politics"?

Q: On Sept 7 Dave asked a currency question and your response was: ‘ The US economy does seem stronger, and we think the US dollar will outperform. Also, when investors get scared, and move to a 'risk off' mentality, they move to the US dollar for safety. Generally, we don't spend much time predicting currencies.’
We’ve recently come into some US dollars and are hoping you could provide some direction for us despite your reluctance to speculate. Brian Ackers’ prediction on BNN this week is the Canadian dollar will fall dramatically to 68 cents. We’re not interested in perfect timing but would like to convert some of it within the next 3-6 months. Any advice would be greatly appreciated.

Q: Everyone, if interest rates stay were they are today ( or higher) for three, four or five years - what would that do to the tech market? Specifically the large tech companies. Clayton

Q: Dear Peter et al:

This is a big picture, non-personal question of a "fictional" account of a million dollars :)

From your answers to various subscribers over a period of years, I know that you have always said the portfolio construction is based on individual's personal needs and wants. Agreed!
Hence this general question!

If one wants to have 20% of the portfolio in NON correlated, steady as she goes kind of stocks or bonds, what should one buy?
I see that even though the stocks and bonds are not correlated, in 2022 they both were severely punished. Gold hasn't gone anywhere. Energy was down now but has gone waay up!

Even the ardent fans of Technical Analysis seem to be "confused" about non performance of their Intermarket Analysis approach. (John Murphy)

So, the question is how can one construct a portfolio with non correlated assets and come up with an asymmetrical barbell portfolio (Nessim Taleb?)
I have been looking at Utilities, Financials, Emerging markets, bonds, Gold........nothing seem to be appealing!

Any words of wisdom?
Many thanks in advance.

Mano.

Q: Just a follow up to a previously answered question regarding which ETFs you would choose. What would be your weighting in a portfolio containing SPY, QQQ, IJH, AGG and VYM?

If you were to remove bonds (AGG) altogether, where would you allocate weighting?

Q: Thoughts on whether or not you think we will have hard or soft landing. If one is a long term investor looking for income/growth what is your advice during this time especially watching areas like utilities/reits go lower and lower? Cyclicals too, not looking good and if we go into a hard landing with lots of bankruptcies things could get a lot worse. Thanks for your insight!

Q: What are some stocks that could do really well with AI becoming more and more available ?

Q: Everyone, will we have a recession in the next 12 months? Also, how does tech compare to the broader market during a recession? Clayton

Q: I am curious about investment strategist Edward Chancellor’s idea that a sector with recent huge inflows of capital is quite likely to see an oversupply and price collapse (e.g. perhaps a partial explanation for behaviour of ‘green’ stocks during last several years). How could the average investor obtain data or insight into current sector capitol allocation? In that context, do you see any sectors that currently might be particularly vulnerable, or alternatively at an advantage, within this theoretical scenario?

Q: If you were to build a portfolio of just ETFs, what 6-8 would you select? Maybe ignore Canada for this scenario as I have plenty of individual positions I'm quite happy with.

Q: "We don't quite match the market in good years but will lessen your losses in bad years" say many portfolio managers to clients in exchange for a 1/2 to 1% management fee.

But, over the years, since the market has had significantly more positive years than negative years, I feel this is a good argument to just purchase some very low-fee ETFs, once you've determined your asset and currency mix. Less fees, therefore more money invested and therefore little value add from the advisor! Your comments please.

Also, I am a 65 year old retiree with a high 7 figure investment portfolio who will not run out of money. I favor a balanced portfolio of 80% equity (with a slight tilt to growth) and 20% fixed income. I also favor a 50/50 split between US and CAN dollars.

While I realize you cannot provide individual advice, which low cost ETFs should I consider?

Q: Could you provide or provide a source for historical TSX sector performance?

There is the TSX 60 performance chart over time and that of individual stocks. I haven't been able to locate a consolidation of the individual stocks in each sector. Thank you

Q: Hi Team,
With the recent weakness (since the end of July pretty much) it seems like growth stocks, tech have been weak. Do you see this as the start of another "free fall" in the market like we had in 2022 for growth names? I find it odd that the central bankers are telling us how "hot" the economy is running and continuing to raise rates, yet the CEO's all speak of the current "challenging economic period". Sometimes I question the job numbers as being highly manipulated. I heard the other day Canadian jobs were high, but immigration was also at record highs and only half the immigrants got jobs which means the other half are a drain on our economy. I am seeing headlines that credit card debt is at record highs. Consumer spending numbers the government pumps out makes it look good but if that is all credit card debt spending then that's just a crisis in the making. I see today a headline of BMO shuttering indirect retail auto loans due to bad debt. It almost seems like right now that there are no catalysts in sight to support stocks. My portfolio has came up nicely this year but is still a far cry from its 2021 highs being that I was tech heavy. And now I feel like we are headed for another big drop or crisis. What's your take on this and is it time to head for the hills and take risk off the table? Thanks for your input!

Q: What sector allocation % would you recommend that one maintain today in a "balanced" portfolio?

Q: What drives the value of a Canadian dollar against the US dollar? We used to be a petro currency but the Canadian dollar is continuing to fall even with WTI oil above $86.00. Some were saying that our dollar follows the US S&P 500 but that doesn't seem to be happening either. Finally some say we weren't as aggressive as the US with our interest raises. I would appreciate your views on this topic. According to RBC the cost of a US dollar for average buyers is1.3955 as I write. Are there cheaper places to buy US dollars besides banks? Thanks as always,
Dave

Q: Hi 5i team:

So today (Sept 1st) there was economic news on a slight contraction to Canadian GDP and the TSX rocketed up, presumably on assumptions about the implications for interest rates. I know you have mentioned in the past that by the time a recession is officially declared we are probably well on the way to being out of it. I’m assuming that the “smart money” probably has more subtle indicators that they watch that probably don’t necessarily make the daily mainstream headlines? Curious if anything maybe below the average investor’s radar has caught your attention of late that has caused you go “huh” with regards to the market (I have learned to appreciate your insights over the years). Thanks,

Q: Can you please give me the P/E ratio range for each of the below sectors? When to consider value and expensive stock.

Materials
Real Estate
Financial
Services
Discretionary
Utilities
Energy
Health
Staples
Industrial
Technology

Thanks for the great service

Q: Retired, dividend-income investor. I have funds available over time to invest in / top-up some of my positions to meet long term asset allocation targets. I plan on continuing to invest these funds over a number of months...as I have been over the past 8 months.

The question is = in what order do I buy the following = XST, XIT (several BNN-ers say to avoid adding to technology at this point), BCE, BNS, LIFE, ZUT.

One method is to wait for these securities to hit my price targets (based on hitting a combination of fundamental and technical targets (a little bit is kind of bottom-feeding).

A 2nd method is looking at setting the order of buying, based on where one thinks each security is relative to their historic value.

Ignore asset allocation...these are smaller amounts and the AA is reasonably good right now.

My suggested order, subject to where each security's price is at (please shoot holes in my plan):
Sept = BNS,
Oct = XST-#1 (in 2 tranches-spread out),
Nov = ZUT-#1 (ditto),
Dec = XIT-#1 (ditto),
Jan = XST-#2,
Feb = ZUT-#2,
Mar = XIT-#2,
As each hits their price target (minor adds) = BCE, LIFE.

Please state your order and why.
Thanks...much appreciated...Steve

Q: I keep seeing and hearing questions about interest rates going down. I'm in my 70's. I had my first mortgage in 1985 at somewhere between 10 and 12% after my family helped me scrap together the 25% down required at that time.
I think interest rates are just normalizing (see https://www150.statcan.gc.ca/n1/pub/11-210-x/2010000/t098-eng.htm) and I do not understand why anyone would think rates would go lower? Could you explain?