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

Q2. There is tremendous amounts of noise. With the current levels of markets, there is a fair bit of perfect scenario priced in than disappointments.

Canada's AAA rating. Looking at where Canada should be trading, it should be at AA-. The US should also be at a similar level. He doesn't think the rating agencies are correctly reflecting the risks. Governments are printing money to manage the debt issues.

ARC ETFs. An ETF issuer that has a number of thematic ETFs, including fintech, robotics, general innovations, etc. He loves this company's funds. Right now, be patient and wait for a pull-back.

Biden. There's going to be political will to raise corporate tax rates and bring jobs back to America. There will be some supply price increases since labour costs will go up. He wants to raise minimum wages, reverse Trump's tax policies, and tax policies that encourage outsourcing. These policies will add to margin pressures. Biden wants to focus on clean energy in regards to infrastructure. ICLN, ZMT could be a good way to play this. Technical set-up and fundamental catalyst point to both benefitting if Biden wins.

Selling in the markets today. After tremendous Q2 recovery, equities are due for a bit of a pause. In part due to rising Covid-19 cases, especially in the US. Slower reopening would dampen corporate earnings. Renewed US-China tensions are probably at play. Upcoming US election divisiveness is weighing on consumer sentiment as well.

What kind of stocks are you buying? Still likes growth over value, as it's performed well over the last decade and should continue with low interest rates. Quality is important, as is high ROE, low leverage. Likes dividend appreciation over high yield. Largest weightings are healthcare, tech, communications, and some consumer. Key secular themes exacerbated by the pandemic are work from home, e-commerce, cloud infrastructure, and healthcare innovation.

Hedged vs. non-hedged ETFs? Long term, US dollar has been moving sideways. CAD will stay in the 70-80 cent range. In general, prefers the US dollar ETFs. But right now, prefers ETFs not hedged to the CAD. It's a little less expensive.

Market Outlook The pending federal deficit is not far from analyst expectations. The deficit is likely only going to go higher. The government is trying to re-balance, but they are trying to support as much as possible so the economy is not permanently impaired. Eventually government spending will have to decline and taxes will have to go up -- likely through the GST. The crisis has caused companies that were already growing well and have done well through this time have seen their multiples expand -- with PEs exceeding 30. The prime beneficiaries have been the fintech companies so far.

Hyperinflation worries? Companies that are not price takers are the best in a hyperinflation situation, where prices rise sharply. Technology companies can -- like MSFT.

The virus surge in the US and elsewhere reflects complacency, since past outbreaks have had second waves. It's tragic. Expects these flare-ups in coming months. Investors have to be positioned for this and as citizens expect draconian lockdowns. Don't time the markets. The market now has high expectations and has been complacent about a second wave. He seeks defensive names, but also stocks exposed to a cyclical recovery happening now--a barbell approach. Caveat: he seeks companies with strong balance sheets to survive a sustained recession. Hot potato stocks like cruiselines have seen wild swings, partially because of novice traders.

Market. The big tug of war is when inflation is going to push interest rates up. He thinks we are in a deflationary period. At what point do we get serious inflation and what does it look like. We have to position portfolios for it. He looks at the velocity of money. Really, printed money is finding its way onto banks' balance sheets and it is their job to find a way for that money to get out in to the economy. There are greater deflationary pressures than inflationary pressures but you have to keep an eye on it. Inflation is unlikely but you should see how much money they are printing in Japan. When Japan started doing this there were fears of runaway inflation but it did not happen. Gold could challenge 2011 highs. There will be a period of consolidation and then it should move higher.

Canadian Banks. There is not a lot of innovation going in so it is how they operate and what is the environment that matters. The banks don't meet his criteria on return on invested capital. There is always the threat of being disrupted. If he did buy one, it would be TD-T or RY-T.

Market Outlook 2020 has been marked by the COVID-19 crisis, both by the plunge and V-shaped recovery and now the rise in cases. We also have a major US election this fall and escalating China trade concerns. Resilient business models, recurring cash flows and manageable debt levels -- exactly where infrastructure stocks fit. They have previously trimmed airport and energy exposures as the dividends are at risk. They are focusing on renewable energy and technology infrastructure, which has resulted in 15 dividend increases this year averaging 7% growth. Cloud computing and remote work location communication are all part of the technology push.

Pipelines? As an investor you should never put a lot of value into something that is a binary (go/no-go) decision. If the project does not go, you may have taken on too much risk. Given it is so hard to get a new pipeline built, the value of the existing pipelines is actually a lot more than the market gives it credit for. He thinks there will be room for two major pipeline projects and no more going forward out of Canada.