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

Cannabis. The stocks are flying a little high. It would be like jumping into tech in 1999. It is tough to gauge the future.

Market. He thinks the market breadth has been slowly expanding since March. There has been no major correction that has occurred while market breadth was expanding. The ValueLine 1700 stock index has hit an all-time high, telling you it is not just a handful of tech stocks leading the market higher. He thinks the market is just starting the next bullish market surge. There are more people short the S&P500 than in 2015. Normally, markets reverse when everyone is “hanging out over their skis” – we are not there yet. He holds 80% of their assets in the US and have been reducing their exposure in Canada due to the current investment horizon.

Technicals and trading. On technical charts he never will make a decision against what the technical chart is saying. He likes to invest in leadership sectors, like inflation based stocks now. He then will look at 150 day moving averages, and would not sell when the price was well below the moving average and he would not buy when the price was well above the average. He likes Point and Figure charts to scan for higher highs and higher lows.

Where are oil prices going? He thinks oil prices are near the lower end of the trading range and more likely to go higher. He would own the best companies in the group as this is a cyclical sector, but not make it a major holding in his portfolio.

Should I sell my negative holdings as the market is trading a record highs? This requires the leap that you are moving on to a better place. Would I be a buyer of these holdings today? If not, then take at least or half or more off the table and watch how things progress. If they are not in the sunshine, be careful. You want to own things participating now. There are many months of higher stock prices yet to come.

The worry for the market is that it will get Trumped. There's been so much talk, but the market absorbs the news about him and keeps coming back. If this earnings season goes well, we will have higher markets. Congress has allowed Trump to take control of trade and tariffs, but he'd be surprised if there isn't sympathy for Canada in places like Ohio because of our existing trading relationships. He hopes Trump is all bluster and is using all these threats to bargain, then eventually backs off. Saner heads will prevail, he hopes. Abroad, China has had an economic miracle over the past few decades and growth has far outpaced that of the U.S. and India (which has been growing rapidly in the past five years). Maybe Americans feels it's now or never to balance trade between them and China. Meanwhile, India recently has been outpacing China.

Canadian telecoms: He owns nothing here. He doesn't believe in their growth rates, though feels these dividends are safe. He's looking for 10% growth + yield, and these don't pass the test.

Helsinki Summit: Whatever effects on markets from this Putin-Trump meeting will diminish and won't last. Generally, politicians take credit for the direction of economies, but company earnings really drive markets. Earnings are the best we've seen in seven years with 20% YOY growth. All positive. The TSX is up only 2% YTD and he believes we can do better before the end of 2018. The Canadian market has long lagged the U.S. market. We are a late-cycle economy and are focussed on commodities. The current oil price drop is temporary.

Overview. He thinks the fair value of the S&P 500 is about 3800, which is 30% higher than today’s level. He thinks fundamentals are great, especially in the US, which is where most of his focus is. He thinks US government policy (and the associated parts of the Twitterverse) is holding the market down. The S&P hit a high in early February, went through a long consolidation, and has risen back to almost the level it held at its high. He thinks S&P will easily reach that this summer. Beyond that, though, the S&P is running out of time. China is slowing down, world growth is slowing down, and commodities stocks in Canada ex oil are not doing well. Many are down 50%, which also suggests weakness in global growth. He expects a recession in the next year or 18 months. In the recent past, the FAANG stocks have pushed the S&P higher. Netflix stumbled but it looks as though Amazon, Google and Facebook are hitting new highs. The financials are acting well. For S&P to rise 30%, the lead will have to come from the financials not the FAANGs.

[Berman's Call today was preempted by breaking news.]

Market. Russia has one pipeline going through Ukraine to Europe. They are working on another one to get around this off shore. The US is increasing exports of LNG and so is able to sell to Europe now. He is an oil bear. Oil went to $75 due to rumours. But OPEC raised production and are saying they will continue to do so. He sees Oil coming down to the low $60s soon.

Trump and Putin meet today: Investors can read too much into a given day. True, Trump surprises investors and roils markets, but overall the long-term direction of the economy means corporate profits and the extent of any trade wars--that will really impact profits and markets. Trump can't aggravate everybody then expect them to help him. We're moving from a momentum to a value market. Investors will be much more cautious about where to invest. You have to kiss more frogs before finding a prince. He can't pinpoint a particular area to invest in, though oil and banks look interesting.

Market. We have a rally afoot presently, he thinks. Normally we see Managers selling winners in June to reposition later in the summer, which can position the market later for a good rally. The trade wars will likely resolve themselves, he believes, so he still sees a brief rally playing out before the fall. The TSX has been in a long term bull trend and he expects it to continue. However, if we saw the TSX move below 15,000 roughly, he would become cautious. The S&P500 continues its bull run and is looking to make yet another new high and he expects that to continue. He thinks any calming of the trade wars with China would cause a short-term sharp upward rally.

Where should one park US currency? He is looking for areas that are seasonally strong, like health care and the NASDAQ. He would also look at pharma and bio-tech, which are demonstrating good bottoming on the charts. August could be volatile as trading desks are often staffed by junior traders.

Perpetual preferred shares and interest rate increases. Perpetual preferreds are not his favorite holding, because of the interest rate increases. However, after selling most of their interest rate sensitive holdings, he is thinking rates may be peaking. He would hold an ETF for a preferred portfolio such as PFD-T. He thinks the equity market for common shares may provide more liquidity, such as Fortis, Altagas or Enbridge and they tend to have a lower beta as well.