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

He thinks there could be some problems with the coronavirus, but China is better organized that during SARS. The tricky part is the longer incubation period that helps the virus spread. China has shut everything down, and it's interesting to see how this pans out. Canada and the US are on guard, but it's not like SARS. It's more a Chinese problem generally but they will over come it.

He wonders if consumption will fall because of the virus. If you're nervous about your energy stocks, people might jump off. Energy stocks might not perform until the anti-fossil fuel group gets rid of all their positions. The sector is super cheap, but they could stay cheap for quite a while. Energy is not partaking in the lift that we see in other sectors.

Market. GDP numbers were not surprising. Corona is certainly a negative but from SARS we would think it will be passing in 6 months. But all of this is impacting oil prices and oil companies are suffering. The world has done a spectacular job of reacting quickly on this Corona issue and there could be some short term impact on global GDP. FB-Q dropped after release of their numbers and so many of these stocks can have dramatic drops with mildly disappointing numbers. China growth and global growth could continue to slow. The stock market rose last year due to multiples rising, and not earnings growth.

Japan small caps. Investors should understand what they are buying. He would invest in a fund that owns Japanese stocks. You have to watch out for derivatives.

ETFs are a tough investment from a bond perspective because they don’t track bond indices very well. Buy a fund that holds underlying high yield bonds that is hedged to Canadian dollars.

US Municipal bonds. US citizens get a tax break. They are priced efficiently for those with the tax advantage. He would look elsewhere. The higher bond market offers better value. 10 year bonds are under 2% and offer little value. Shorter bonds yield above inflation and you are not locked in for a long time.

Emerging Market Country High Yield Bonds. Don't buy emerging market country high yield bonds. If you own a country's high yield debt you don’t suddenly own part of the country and they can do what they want with the debt.

Markets in the wake of coronavirus. Something else to worry about. In past epidemics, once the WHO declares an emergency, the market moves up. Not sure if that will happen again, but historically it's happened almost every single time.

Amazon earnings. Doing very well. Decent guidance. Very good numbers on earnings front. Some concern is expense of logistics for one-day Prime, etc. Great long-term story. Have to see what happens over next few days and weeks.

Visa earnings. He owns Visa and Mastercard. Secular digital shift still in progress. Expenses will increase in 2020. Macro risk is economy will slow down. Continues to like it. Be careful of where we are in the cycle. Looks as though we'll avoid a recession in the next year at the very least.

Is coronavirus the wild card? Upper end of the 10-year range of the S&P 500. Inflation and interest rates are still low. Pretty good start to earnings season. Difficult to determine impact of virus. Today, countries are more equipped to put a lid on what's happening. His guess is the economy and market will be OK, despite volatility.

Bond ETF for a retirement portfolio. XSB is a basket of mostly investment grade corporate bonds. 44 basis points expense ratio. For high-yield bonds, you want to own most US bonds. He owns XHY which is hedged to the CAD. Vanguard and BMO also both offer strategies.

BMO covered call ETFs. For covered calls, look at your thesis on the markets. If you think the market's going up, better to own the underlying securities. If the market's flat or going down, covered calls make sense. He prefers the securities. But if you twist his arm, it could make up a portion of your portfolio. The utilities ETF could make sense, global high dividend, US high dividend, or hedged Dow Jones.

Caronavirus concerns? Copper and energy have been impacted the most. SARs had a 6% death rate, while Corona has a 2% rate. The situation to know more is better than with SARs. This is a concern, but it probably just a blip. Markets are getting used to huge news events and quickly discounting them. The question is, does this virus have a long last impact on demand the market? We should be concerned about this, but it seems less dangerous than SARs. The market is already showing relief.

Interest rates? There is a real dicotomy in the market today. We have global growth kind of recovering, while US and Canadian growth doing okay as well. The Central Banks are saying until we see inflation at 3% or higher, there will be no further interest rate hikes. This could make the US dollar very vulnerable. There are massive deficits on the US side ($1 trillion this year) and that could double. This requires the issue of ever increasing bonds. He begins to wonder if there will be enough buyers. His conviction on this is not high, yet. He thinks Canada is still on sale and still disregarded. Canada's deficit is relatively small compared to other G6 countries.