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

Market Bubbles. The market could be susceptible to a correction, but it is only probabilities. Europe is starting to fall apart with weaker earnings. The US seems to be standing alone with its market success – but will it last.

Seasonality in Industrials. These tend to do well from January to May and retrace in the rest of the year. There has been weakness earlier in the year than normal, which is suggesting headwinds for this sector.

Health Care Sector. This tends to be known as a defensive sector, because of the stability of earnings. The issue this year was that President Trump threatened to come after the pharma sector for medication costs. Seasonally the sector tends to do best from August into October.

Bank share selloffs after earnings. Canadian banks are very popular and investors tend to prices up in anticipation of earnings, especially ahead of year-end earnings. There tends to be a price decline unless there is a really bullish earnings surprise. The concern today is about mortgage origination. This trend is scary for the sector.

Cash. This is the time to be more conservative and there could be bigger corrections than normal, so he wants to take advantage of any opportunities. Since 1950, eight of the largest market corrections have occurred from May 25 to October 27 – especially September. Only two big drops have occurred outside this window.

Breaking news: Canadian government blocks Aecon takeover by a Chinese company: There are security concerns. Aecon builds military facilities, nuclear power plants and telecommunications. It must've been a difficult decision, since
Trudeau wants to build trade with China. But realistically, it's probably a good thing to block this deal out of security reasons, and it's not the only deal that's been cancelled for this reason. It's a tough decision. It was always a risky deal, and tomorrow there'll likely be more downside and significant market reaction. Regardless, Canada needs to build infrastructure.

What to do with cannabis stocks once cannabis is legal? They're like mining stocks, which start with a run-up in price afer people recognize that there's a reserve of the mineral. Then you do an environmental study and raise money, but then people get bored until the mine goes into production. HMMJ-T ETF peaked at end-2017 then pulled back in early-2018, but now that we're approaching the time when the rules will come into play (legalization), we're seeing M&A and a lift. This group is now interesting. He holds a 4% in the cannabis sector.

Overview. He doesn’t sell everything in May, or even most of his stocks, but he does his tax-loss selling now and prefers to buy in August / September when prices are more likely to rise. This is a good time of year for stink-bids, in which he offers a low price late Friday and sees if someone fills it over the weekend or on Monday. However, he does not use put options because he prefers not to force himself into timing issues after he has bought a position.

Uranium. This sector has been out of favor. Cameco (CCO-T) and GSE Systems (GVP-A) are his picks in the sector.

Silver. The silver sector has not done as well as the other commodities. It was more interesting a few years ago.

It's odd that we're not seeing good Q1 earnings reflected in stock prices both in Canada and the U.S. Doesn't know why. Facebook and FANG stocks have recovered from the winter dip/scandal. The U.S. has a healthy economy with low unemployment, and so it can handle faster interest rate increases to 50 basis points. The U.S. 10-year yield has cracked 3%, but it's still historically low like interest rates. In Canada, he's sold half his stocks, because he sees no resolution of any issues. NAFTA and TransMountain are up in the air. He doesn't see a lot of money coming into Canada. Canadian bank earnings this week: he likes Canadian banks because they have exposure outside Canada, though he doesn't see big growth in them.

He's not interest in any cryptocurrencies, including Bitcoin, but he's interested in the process of blockchain--that's real and growing.

Are ETFs what a retiree should invest in? It's a very good idea. He buys them for his retired clients. The question is the bonds/stocks balance. Also, you can invest globally through Canadian ETFs, hedged to the CAD so you're protected.

What asset allocation do you recommend for a retiree? A typical retiree should hold 40% bonds and 60% stocks, but he stresses owning at least some U.S. and limit Canadian exposure. Too many Canadian holds too much Canadian equity and zero American. Also, don't fiddle with your portfolio. Let it ride and leave it alone during volatility. Be CAD-hedged for safety.

Should I switch from mutual funds to ETFs in my RRSP? Definitely. Mutual funds underperform the indexes because of high fees (2.25-2.5%), whereas an ETF can track the TSX for 0.08%. He wouldn't touch an ETF that charges say 1.00% MER. Bond ETFs are pricier, starting at 0.25% for some reason.