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

the logging industry U.S. housing is rolling over, based on data. It's negative. Same goes with China. Settling the trade issue could help lumber. U.S. housing as is good as it gets in this cycle. Canada faces more of a chance of a downturn than America

Sell Canadian banks now? No. Hold them. He isn't worried about a collapse in this sector. They'll be safe in a downturn. But he's concerned about growth in the future. Analysts are too bullish about Canadian banks. Their loan losses are at record levels and Canadian consumers are heavilty indebted. You're getting a decent yield. They're safe.

Are we heading towards a bear market? He thinks so. Earnings growth estimates are slowing down. Margins are at all-time highs. The strong US dollar is hurting overseas markets. Chinese stocks are down 25%; Europe down 15%. We no longer have zero-interest rates. ETFs have sustained past growth, but those haven't been tested in a market downturn. We could still test the February lows, and what catalyst will drive markets higher?

Market Outlook. He has been waiting for the correction that happened last week. Trade wars, ballooning deficits, telegraphed interest rate increases, all predicted that this would happen. He thinks the US tax cuts kept the market up this long as these cuts flowed through to earnings. He would not be sounding the all clear yet. Today is an up day. Volatility is increasing. He doesn’t think the next 12 months will be too great.

The current market dynamic tells him that the market is showing a lack of interest in bonds. Usually a sell off would have resulted in bonds rallying. ACWI and ACWV ETFs are indicative of global markets, and the current trends show we should be managing our portfolios in a very risk conscious way. We should expect higher volatility and lower returns on capital. The theme now is how to take a protective position with low volatility – reducing beta.

He's embracing this volatility. He raised a lot of cash before the fall dip and bought aggressively. He even called for a drop in oil. Oil had plunged because of a supply glut. But we are now at a turning point. Supplies usually rise in mid-November, then decline to year's end. We should've seen stablility around $55, but we broke below that. Seasonal weakness usually ends around early-December.

Why is a 200-day moving average so important? Instead of looking at daily swings, investors can look at this. Long-term investors should look at the 200-day. Intermediate ones, the 50-day. Short-term ones, the 20-day. The markets have traded below the 200-day, which means upward resistance. If this stretches too far above or below means the price could mean-reverts, which spells opportunity, as in January 2018 when the average shot up, then suddenly corrected. Recently, we could be seeing a trend of lower-lows and -highs. Watch the 200-day closely, because if it doesn't break above that, we could see pain ahead.

The 200-day chart of the S&P 500 We're beyond the high-growth phase in the economy and now in a moderating phase. There are still higher-highs and -lows, but momentum is flagging. We're not facing a recession tomrorow, but we are definitely in the late stage of the economy.

Market. We are in a bull market correction. The fed is forecasting 4 hikes and the market is saying it should b 2.5 hikes. The market is not willing to move up until the Fed acknowledges that may have to reign in their expectations. There should be volatility next week in the S&P, going down another 75 points. He likes the market here. He thinks we will have a year-end rally. There are pockets of overheating in the US labour market but with oil prices coming down that should ease the situation. He is seeing great value in Canadian stocks but foreign investors continue to short our market. The tax break last night will help the Canadian economy. We need help out west with our hydrocarbons, however.

Shorting Natural Gas. The only way to do that here is NGA (*Speculative Short*), which is US NYMEX gas. It has spiked up so will probably swing back down half way. You are making a speculative bet. He is more bullish on Natural Gas longer term. HND-T is a shorting ETF that resets every day. It is very volatile. You should only hold it for one day.

The TSX in General – Why stay? Just use the US. Cyclical names since 2008 have not come back. Don't exit Canada completely. There are software and healthcare companies. 15% of your money should be in Canada.

Market Outlook - The Equity market is on sale. Earnings are very consistent. Even in Canada Earnings surprised more n the upside than the downside. The trillion dollar question is when the equity market goes up. The gap in Earning Yield vs 30-yr Government Bonds is bribing you to buy equities. In the Corporate Bond market his fund is invested in the short term side of the yield curve. Bonds lead and credit spreads are an indication of where Equities are going.

Which one would you pick among Utilities or Telcos or REITs? - Utilities have been washed out. Among them Enbridge (ENB-T) offers a particularly good opportunity as it is cheap.

With rising rate environment how REITs are going to do? - At his firm believe that normalization is happening. We are getting there. They think that inflation is not an issue given the massive dislocation in global market through AI, disruption of technologies, etc. He believes that there is always this inflation fear that is not going to happen. As a result interest rates are going to stabilize and the sector is going to go up.

What would you recommend in term of bond trading at a deep discount? - He has some bonds on Energy company. He suggest getting 1.5% over Government of Canada Bonds. If you are going to own these bonds you have to sit on them. Liquidity for retail investors is difficult. You have to let them mature.