Next Market Trigger: Fund Manager Reveals What Ignites The Next Move | Brian Belski

0:00 The US market will continue to be on pace for this bull market. In fact, stocks have become more attractive from a valuation standpoint on $100 plus WTI does not really affect the consumer and or the companies until well over six months duration above 100%. With silver back down to about $76 an ounce, what should we do get back in now is that is that it hasn't fallen enough I think because things don't Speaking on the 9th of April, earlier this week, equities surged on the news that Iran and Israel and the US brokered a ceasefire deal What is next? How should we be positioned going forward? How long could this ceasefire last? How long will the Strait of Hormuz stay open or closed? It didn't stay

0:45 open for very long after the ceasefire was supposedly broken by Israel attacking Hezbollah in Lebanon. Welcome back to the show, Brian Belsky, CIO of Humulus Investment Strategies. a veteran of Wall Street for over 35 years and former CIO of BMO Capital Markets. Welcome back, Brian. Good to see you. Thanks so much for having us, David. We really appreciate the support. Last time you were on the show, you had maintained a S&P 500 target of 7,300 points to 7,500 points, correct me if I'm wrong, for 2026. That is a bullish forecast. Have you changed your outlook given that obviously major developments have happened since last year on before the Iran conflict started in the February 28th. Absolutely not. We think that

1:32 the fundamental condition of US stocks remains very good. And in fact, if you take two steps back and think about the weakness that we've seen in several areas of US stocks, namely tech stocks, stocks have become more attractive from a valuation standpoint, number one. But what's really interesting, David, is that earnings growth and earnings estimates for the S&P 500 in certain sectors, including tech, financials would be another one, have actually got up since we talked last. So I think this malaise, the conflict is yet again, some noise that investors with respect to emotions and fear are driving them, hopefully not, but they do drive investors to make uh, snap decisions on selling equities. We clearly do not believe that that's the right thing to

2:20 be doing right now. And we do believe that, uh, the U S market will continue to be on pace for this bull market. Number one, but number two is part of this big 25 year secular bull market that we've been calling for since 2009. But you don't think one counterpoint is that perhaps the federal reserve may not be as dovish as previously anticipated, given that the straight of Hormuz closure, spiking up oil has caused permanent inflationary pressures to seep into the economy. What do you think? Permanent? Permanent. Hmm. It's a pretty strong word. No. Demand destruction. Demand destruction on $100 plus WTI does not really affect the consumer and or the companies until well over six months duration above 100%. That's number one. Number two, people seem to forget the United States of America

3:11 is the world's largest oil producer. Okay. Number three, this is not the 1970s. This is not, we had an embargo then we weren't as energy dependent as we are now. And number four, I think because things don't happen right away now, we expect because of the machines and news, we expect things to happen right away. And in 2022, We had the inflation spike that was stubborn and it was stubborn because of monetary policy. Money was cheap and then they were behind the eight ball in terms of raising interest rates and inflation typically and historically goes up like an elevator so fast and down like an escalator so slow. The major input in inflation this time around is WTI.

4:01 Inflation has been slowly coming back down to reality. You know, what's interesting about the Fed and people talking about this permanent, which is, I think, silly using that word in terms of inflation. But remember, the Fed has a dual mandate, employment and inflation. And so employment remains very, very, very meek in terms of unemployment. And remember, let's go back to what I talked about in the beginning. Corporate America is very strong in terms of earnings and cash flow. And so from a hiring perspective, they're gonna continue to be able to hire people. So the Fed, we're not basing any of our longer term forecasts on a Fed forecast because reliance on the Fed has proven to be a failed strategy. Watch the 10-year treasury. We believe the 10 year treasury is going to be is settling in when this

4:48 350 to 450 range. And that's been our call now for a couple of years. We think that's going to continue for the next two to three years. What should have gone differently to give you a more bearish outlook? In other words, how should the conflict or war in Iran, however you want to describe it, could have played out that would have changed your outlook fundamentally with regards to markets? Well, we don't let politics or these types of things shake us. We've been through several of these in our career. I remember the very first one when Iraq invaded Kuwait and the owner of the firm that I worked for in Los Angeles said we were entering into a recession and cut half the overhead in one day, cut half the research department. Three months later, we were back in a bull market in the fourth quarter of 2000, I'm sorry, 1990. So, you know, I've kind of lived

5:37 through these things. I've seen the movie before, as we like to say. What it would charge us, we need duration on the inflation side. This is all about duration. Bonds are a duration and convexity play, but equities, we need to see some sort of longer term duration of inflation like we did in 2022, by the way, several months, we're six weeks into this. And so we need to just calm down and watch this process, as I like to say in Canada, unwind when the conflict is slowly unwinding and everybody thought it wasn't. I can't declare as a strategist, I think, We're, you know, strategists now are talking about what boots on the ground means to conflicts. I mean, that's silly in terms of war and other conflicts that have happened. So we're not going to do that. We're going to focus on investing. How important

6:24 do you place or how important is investor sentiment to you? So this is just one survey. This is from the American Association of Individual Investors. Neutral sentiment expectations at stock prices will stay essentially and change over the next six months, decreased 3.1% to 15% bearish sentiment, increased 1.6 percentage points to 51.4%, unusually high, it says, and is above its historical average of 31% for the eighth consecutive week. How would you interpret something like this, Bryce? That makes me incredibly bullish. And here's why, because... In the contrarian basis, you always want to do opposite of things like this. These are fantastic contrarian signals. If you take that AAII chart like we did in a research report a couple of weeks ago and then

7:11 track performance following that, this is one of the deepest bearish moments that we've seen in the last several years. And then following recent troughs in this, like we're having right now, the market's up dramatically in the next 24 months. So these readings are important. But I think, you know, it's more important than surveys is actually talking to clients and getting the real sentiment. And I think wealth clients are much different than institutional clients. Institutional clients are marking themselves to the market every day, seeing what their portfolio is, and they've been much more, much more tactical in terms of selling. And then they'll miss days like we had earlier this week, they didn't get in the market fast enough. So that's why a lot of the institutions especially in

7:57 2024, 25, massively underperformed high net worth and wealth clients because wealth clients traditionally are a little bit more longer term thinking and they stayed invested. Before we continue with the video, let's talk about your most important asset, your personal data and privacy. Now, your personal data is constantly being collected and sold and exposed online from places like shady data broker sites and even big data breaches. So your private information, like your name, address, and phone number is out there on the internet. And it's easier to find than you actually think. That's why I recommend today's sponsor, delete me. It takes a few minutes to set up and they handled the entire process. They find where your information appears, verify those listings and submit removal requests to hundreds of data broker websites. They also continue monitoring over time since this data can

8:46 resurface and reappear. I've been using it for over a year and they have reviewed over 325 listings for my information. The reports show exactly what was found and what was removed, which makes the process transparent. Check it out now. Scan the QR code on the screen or go to joindeliteme.com slash David Lin. Link in the description down below and use my code David Lin for 20% off. Take control of your privacy today. Now back to the video. Any particular sectors in the S&P 500 that you like more than others right now? We're overweight communication services, financials, and utilities. You know, it's interesting about financials. A lot of people were bullish financials in the beginning of the year and they'd given up on them all of a sudden. And part of the reason why they were bullish financials in the beginning of the year

9:32 was the Fed and a rising yield curve, steepening yield curve. But our view is much more thematic. We believe that the scalable notion of big financials in the United States and very small banks in the United States are gonna continue to be the winners. In between, we think we're gonna see some consolidation in the super regionals. And all of a sudden, no one's talking about deregulation. Deregulation in financials is still happening. And by the way, too, if you go back and look at where earnings growth is, earnings growth has been very strong for the financials. Communication services has been one of our secular bull type of sectors, namely names like Google, Netflix, Spotify. And if you need yield and more defense, Verizon, AT&T, both those companies have kind of got back to their core

10:21 belief system, meaning broadband. Tech we're neutral on and we've been underweight the Mag7 this year and underweight Mag7 and our premium employer all of last year and we've been able to outperform. And the reason is, is that stock picking is back, David, and you don't just own tech, you have to own select tech. And I think that's what's helped us. And we've had an amazing week this week because we haven't owned everything. You just own the very concentrated things that we really like. The you you picked financials back in January, if I if I if I remember correctly, this from US News Hedge Funds aggressively short financial stocks, says even better dated March dated March 16. This was a month. This is a couple weeks ago. I

11:08 don't know if these short positions are still in the market, but that global hedge funds sold shares of bank insurance, fintech and trading companies in the week of March 13. What are you seeing that perhaps some of these institutional funds are not? Well, again, the institutional hedge funds are much more short term. They were capitalizing on the negativity surrounding private equity and private credit. We got out of any kind of semblance of, here, some of that when we sold Blackstone much earlier this year. And I think the consensus was beating up on the big banks because of the potential private credit issues. We think this was a momentum trade to the downside where everybody was just kind of following the same trade. From a fundamental perspective, we don't agree with this. And oh, by the way, hedge funds, take a look at hedge fund volume and the number of hedge funds now versus 15 years ago. Then you

11:56 tell me where the smart money is. Is it hedge funds? No, the number of hedge funds and assets and hedge funds have gone down dramatically the last 15 years, mostly because of their very, very poor performance. So I love when I see this kind of thing because I think it's more driven by momentum and sentiment. And from again, from a fundamental perspective, we'll take two steps back and see that these financial stocks are under owned from our wealth clients under own in terms of global clients looking at US banks. And I think it's I think it's a major, major mistake. Well, what's your opinion on the private credit redemptions that have been soaring last month? Any systemic risk there? Not systemic risk, systemic, every time anything comes with credit, they think systemic like 2008. This isn't 2008. However, where I do think that there's some

12:42 similarities, David, to 2008 is liquidity. And if I go back to my days at Merrill Lynch back in 2008, we had a lot of discussion with private investors selling their hedge funds, and they couldn't sell their hedge funds fast enough because of liquidity and all these lockup fees. Same thing, kind of holds true with some of these private equity. And I think a lot of private equity companies got over their skis and spent too much money on some of these deals and borrowed money at higher rates. And so I'll spend the positive side of this. The positive side of this, David, in our view is that this is gonna be a major positive for small mid cap publicly traded companies. Because if you're an investor, a private wealth investor that got really excited about these private equity deals and private

13:28 credit deals, those private equity deals are usually involved in investing in these smaller, exciting emerging technologies. Well, guess what small emerging companies are in the public marketplace? Small mid-cap companies, which are all by the way, have liquidity, have to report their income and their financials on a quarterly basis. And so I actually think that the ultimate unwind of private equity and credit could be the wind up and create demand for small mid cap stocks in the public marketplace, which again is a place that nobody's wanted to invest in because of the momentum of large caps. But I think small mid caps over the next 10 years are gonna be an asset class that people are gonna wanna be in. How do you feel about software stocks? This is the IGF. Yeah. The iShares expanded tech software ETF. This is the

14:18 worst start to the year since 2022, down about 35% from the top. This isn't just broad market related. A lot of these software stocks suffered because open AI and anthropic among other AI companies have basically made a lot of their services obsolete overnight. Would you be short the sector right now? No. I know that there's been some contrarian buying in this sector. We're very select in the names that we own here. And the problem that we've seen and kind of dug deep into is revenues need to exceed the expenses of bringing in these AI platforms in terms of what the investment dollars that certain companies have invested in. So we've kind of said, we want

15:04 to be in the best of the best. but we think Microsoft's gonna be okay because they've been able to monetize these assets that they've proven in the last 15, 20 years. We think Oracle is gonna continue to be okay because Oracle really didn't need the money. They just went into the private, they went into the private market to get the credit where they've got a bunch of cash in the balance sheet. I'm not worried about that. Palantir has one of the best products, period, in that. It's an expensive stock, but we wanna buy Palantir because of the product and because of the management team. And then I would say Palo Alto on the software side, which is really a bigger theme in terms of cybersecurity in this conflict that we're still ongoing. We think that cybersecurity remains a major, major theme in terms of investing in the next 10 years, but we're gonna be very concentrated in terms of what

15:50 we own in software. And I think buying an ETF like that, while down 35% and people can play that way, but this is a great example of you wanna own stocks versus versus index and sector ETFs because you want to buy the best stocks, not just all the stocks. But are there specific tech stocks or tech subsectors that you think will outperform over another? For example, I was just reading RAM chip makers are now facing higher margins and lower prices potentially because Google's AI is going to... is going to necessitate fewer RAM chips and less memory. And so that's one sector that may not may not see a rosy future. What do you think? It's

16:39 a great point on that. And something to substantiate that, David, is that, you know, we we have done through our 36 plus years doing this, a lot of work and on industries and sectors. And we we have learned through our time that semiconductors and chips in particular are the most volatile earners of all of the technology stocks. And I think we kind of forgot about that the last couple of years, we meaning the marketplace because of what's happened with Nvidia and the Taiwan Summit conductor and all of the, and Micron and all of the really exciting things that has happened to some of those companies. But this is another great example is you don't have to own everything. And I don't think you need to buy chips here or try to call the bottom in chips. We want to be in the best AI company period when it comes to semiconductors or chips and it's Nvidia. With respect to Google

17:25 doing chips and now Meta trying to make chips, I have a fundamental issue with that and that's why we don't own any Meta. But Google is the name that we doubled our position in last year and we think Google is by far the leader in terms of communication services aside from our big positions in Netflix and Spotify, just because I think Google knows how to monetize things. They've been very smart on their AI spend out, build on, I'm sorry. And you were provided one of the best contrarian buy signal there last year ever when everyone sold, the hedge fund sold Google when ChatGPT was trying to convince people they were gonna use search anymore. How'd that work out? And so Google, I think, is a fantastic company. And I think stepping away from the AI side of things, if you take

18:14 YouTube out of Alphabet, YouTube is actually bigger than Netflix. And I believe, and we've said this for several years now, that within the next five years, major league sports in America are all going to be streamed. And Alphabet's going to be the winner. Netflix can be the winner. Apple will be the winner, and Amazon will be the winner. Those four companies are going to be the winners in the streaming side of things of sports. Two weeks after you came on my show in early January, oil spiked to, sorry, silver spiked to 121. You said proceed with caution on silver. That was at $90. Then two weeks later, it spiked to 120 and then collapsed 30% immediately after. So that call was rather prescient. With silver back down to about $76 an ounce. Are you suggesting we, what should we do? Get back

19:04 in now? Has it fallen enough? No, I mean, we were cautious on silver and gold because of how extended it was coming into 2026. We have been neutral, both areas. We like copper instead. because of the AI play in the infrastructure side of things. So I think too many Canadian investors have relied on precious metal performance for the portfolio that always worries us when it's that concentrated. And so we would continue to be more cautious there. The sector in general, meaning materials has dramatically underperformed. The other key thing, let's take two steps back in terms of the precious metals and talking about gold. Gold underperformed during this conflict. And that should tell you something as well. Okay, finally, we have a minute left. Let's

19:51 talk about this news release. So Humulus launched three ETFs, the North American Tactical Equity Fund, North American Dividend Growth ETF, and the Humulus Fundamental Opportunities ETF. Tell us about the thesis behind these three ETFs. Well, thank you. These ETFs are representative of the way and the similar products that we've run in the Canadian marketplace for over 13 years. Fundamental Opportunities is an ETF that's two-thirds Canada, one-third US, meaning primarily Canadian companies, but we layer in the best of the US. The dividend growth opportunity ETF looks at North American dividend companies that are, I'm sorry, pay dividends and grow them

20:37 over time, David, something that we've been researching for decades in terms of how to own dividend growth. And so we look at that portfolio and build at 60% US and 40% Canada. But Canada is really where we get a lot of the big dividend yields for. And then lastly, the tactical, ETF is something that we've run in both ETF and mutual fund before in the past. And we're also issuing a mutual fund here in the next few days. And that particular portfolio looks at 75% US and 25% Canada. So the very, very, very creme de la creme best of Canadian companies are in there layered in with really the diversification of industries within the US. And we've had a tremendous amount of success running those. In the past, we've continued to run them. Since we started humanless

21:27 investment strategies, we're very honored to be partnering with Longpoint, who has been able to provide us with a turnkey solution and get us back into the marketplace, where a lot of Canadian investors have been asking for us. Perfect. Well, thank you very much. Tell us where we can find more information about your work and humanless. It's a fancy website, humilisinv.com, H-U-M-I-L-I-S-I-N-V.com. Our tagline is, we invest with conviction and humility. And that's the way that we're always going to be. We're convicted in terms of our ideas and we're consistent in our ideas. And we are excessively humbled by the great clients we have in Canada. Excellent. Well, thank you very much for coming on the show. We'll speak again soon. Take care for now.

22:15 Bye. Thank you. Thank you for watching. Don't forget to like, subscribe, follow Brian. Links down below.