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

2019 prediction? January to June may be up and down, but after July we'll be in much better shape after digesting a long correction.

Market Outlook He thinks the washout lows of December are now oversold. He expects a full rebound into March and perhaps into September or longer. An inverted yield curve typically results in a market rally for nine more months. The trade overhang issues will continue, particularly on the technology side. He expects patent battles with China to continue. On a 200 day moving average basis only 11% of US stocks were trading above the long term average -- similar to 2011 and 2016. This has resulted in PE ratios becoming much more reasonable. He has 6 "okay to buy" dividend strategy stocks right now -- so he is waiting for the all clear signal to come.

Dividend trading strategy You must look at a company's trailing four quarter payout ratio. If it is less than 75%, it is a buy. If it is above 100%, then it is a sell as the dividend is not likely sustainable. The earnings growth is also important to be able to sustain the growth. This generally results in his picks averaging less than the market average yield.

Canadian dollar outlook. He thinks the Canadian dollar is likely headed lower -- based on recent technical analysis. It is usually a reflection of what is going on in the country -- with oil prices looking weak, he is not bullish. He is not expecting the Notley government's production constraints for January to have much of an impact on the dollar.

Where are the markets going from here? Major 4-year bottom cycle in 2016. In October, there was a standard pullback. At first, they called it a "holiday sale." But the technical damage was severe, a 4-year cycle reset, a business cycle contraction. So 6-9 months from now, there will be economic weakness. We're in the process of starting a new 4-year cycle. On average, the 4-year cycle pullbacks were 15%, and they lasted 34 weeks. If we hit either goalpost, he'd look to add to equities. This is not the start of a new bear market. From 2000-2010 was a secular bear market, where the price damage was around 34% and the duration was also extended. Current cycle sets us up for another 2-3 years of upside.

Gold longer term. "Intermediate term" is 3-6 months. Right now, we're in a commodity bear market. Whereas between 2000-2010, we were in a commodity bull market while in a secular bear market in equities. So commodities were bid up more than stocks. The next commodity bull cycle should be around 2028-29. In the next few years, gold will underperform equities, but there will be periods when it will be great to hold. Three factors caused him to be bullish on gold in August/September: seasonality, low valuation, and commercial hedgers were long. It could get more dicey in the near term.

Healthcare sector for the long term. Managers rotated to it as a place to hide when the market was volatile. If it's paying a strong dividend, no reason to sell. Especially with the 4-year cycle reset coming up. There will be a rotation out of defensives and back into cyclicals, so don't sell at the lows. There's more upside to come. Has a long-term, stable uptrend.

Copper. This is one of the canaries in the coalmine. If the 4-year cycle reset does take hold, copper should hold in. We're getting close to a critical level. So if we go below the lows, the next major support level will be $2.50. And if we go below that level, then something bigger might be happening, and the 4-year cycle reset may not be coming up.

Market. The current market turmoil does not bother him that much because of his portfolio. He was going to say that but for most participants in the market he wants to be more respectful of volatility. Bottoming is a process. It will only be proven with what goes on from here. This was an area where one would expect a bounce. What counts is what happens next. He would like to look for a bottoming process from here which includes the credit markets stabilizing. The banks should go sideways from here and not down. He is optimistic. Focus on owning higher quality companies for the longer term.

The US Fed. If the Fed wants to communicate a message clearly, they know how to do it. He thinks they want to continue to run off their balance sheet and to continue to hike. It should be no surprise that volatility is increasing. He thinks they want to have dry powder. He thinks they should be more moderate than they are. The corporate world has never had more cash. He has no corporate bonds in his portfolio. Cash is a much better asset to barbell a portfolio.

American and Canadian markets snapped back after Christmas. New York markets today gave up half the gains of Dec. 26. Lots of volatility based on old-fashioned fear and greed. It's hard to get a sense of what will happen from day to day. Tomorrow is anybody's guess. We just got to ride through it. In 2019, we'll see economic growth slow to 2% in the U.S. (and Europe), but we will see positive growth and earnings. We've seen tax-loss selling lately and algorithms exacerbating the selling. We'll see calmer markets; volatile markets last 3-6 months typically. The U.S. Fed has been quite aggressive with 3-4 rate hikes scheduled for 2019 while selling their bonds. The market is telling the Fed that it's getting ahead of itself. He predicts the Fed will moderate their outlook in reaction.

Market. `` Quantitative easing was when the Fed was pumping money out into the market by buying bonds – $4.5 Trillion. Quantitative tightening is the opposite. They are pulling money out of the system and affecting overall liquidity. So now the market does not have those support levels. Earnings are still growing, however, so that is cause for some optimism. Companies beating earnings expectations could change the sentiment in the marketplace.

ETS and REITs: Are there Trending ETFs that provide significant growth? An ETF is just a container for companies. There are so many ETFs out there but the market has not done well this year. He would not blame the ETF structure for bad performance. You have to focus on what you believe is the right way to go. A REIT ETF is a good thing in that it lets you invest in REITs.

Rate Reset Preferreds. Some of the rate reset preferreds have not done well this year. You have to understand the product – the underlying investments.

Educational Segment. What history tells us about the performance of the TSX vs. US markets. We tend to think that if the TSX underperforms this year then it will definitely outperform next year. Historically, that just has not been the case. We often underperform for a few years and then outperform for a few years. One of the determining factors is the price of oil and the energy sector. The TSX performs closer to the US Energy sector less the S&P percent gain for a year. And there is a high correlation of the TSX to the price of oil. Starting October we saw a slide in the price of oil.