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

Canadian Dollar. The best time for strength is from Feb. to May and from now until the end of September. So look for it to move higher. It has already taken a huge run.

Markets. At this time of year the markets, in a year ending in seven, make an above average drop in October. Looking at the technicals, they are happening this year. A third factor to look at during seasonal analysis is recurring events – there aren’t any recurring events every 10 years.

Markets. There is a long term investor’s story and a shorter term story. He raised his cash levels from 5% to 20%. Longer term he thinks it is a fabulous environment. Shorter term the market has gone up without a correction so he is more defensive in here. He does not see a bear market at all. The secular bull market should go on for decades. When the leaders in the market get tired, then you get your correction. In the ‘80s market top there were three stocks that were taking the market higher and when they wore out the market went down. We are seeing this in the tech stocks. They have a lot of positive momentum in them. SHOP-T and FB-Q, for example, will have a lot of people exit in times of a correction and will correct more.

Japanese Casino Gambling. He looked at the entire sector a couple of years ago. He looked more at Chinese gambling, however. He did not buy. You want to own gambling stocks when the market is to the upside. Look for stocks you would like to own in this sector and then watch them through September/October for a low and if there is no correction then continue to watch them until the spring. Get them on the next up leg in the market.

Markets. There have been two questions from his clients: When is the warm weather coming and when is the correction coming. He thinks a minor pull back is the most we will get. Investors are ignoring all the good news that is happening around the world: Positive economic data all around the world and in the US earnings are up 12% year over year. We have a beat ratio of 77% in the S&P. The markets have realized that we are not going to get the tax reform or deregulation we were expecting. The TSX has been a laggard compared the rest of the world. NAFTA renegotiations are also having an effect. International markets have some compelling stories: stronger earnings and an upturn in economic data. Dividend yields are even stronger. We have had a period of relaxed volatility and now it is elevating. This will stay. It presents buying opportunities.

Markets. This US administration came in after the election with a lot of fanfare and there was a spike in value stocks. They sold off with broken promises and have been replaced with a selection of growth stocks. People are worried about the US economy. Earnings season was fine. If you look at the broad market, S&P100 are up 9%, S&P Midcaps are up 2% and S&P small caps are down 2%. It is a few mega caps that have been driving it. The TSX is down 2% like the broader US market. There are not a lot of sectors that are working. A correction won’t necessarily mean a bear market. The high yield space has had some stress and Canadian equities have been trending lower since May. The US and Europe are the ‘last man standing’. He would happily take some risk off the table rather than sit back and watch a correction. The yield curve is flattening. Golds are picking up.

Markets. The broader market is expecting another increase in interest rates from the BOC. There could be more in 2018. Rates going up will hurt dividend paying stocks short term, but long term they will adjust. In certain sectors there is overvaluation and the US market is fully valued at present. In Canada two of the biggest sectors have not done well. The banks should do fairly well because they should get their margins up. Insurance companies should do well in a higher rate environment. Pressure will be put on utilities and pipelines, but only short term as long term they get it back through inflation adjustment as that is the way they are paid.

Markets. Trump still has a twitter account and the economic agenda is not moving forward still. If there is a time you are not worried, then you should sell everything. What will scare people, are surprise interest rate rises and that is probably not going to happen. Corporate earnings are doing okay. Canada is doing okay. You never know when inflation is going to show up. Metal prices are doing quite well. There are some bets being made for future inflation. We are just not quite there yet. The TSX really needs to pick up speed. It has been a loser this year. He says to forget the TSX and just have a lot of sector representation. Don’t ignore the sectors that are doing poorly.

Markets. It is impossible to say if you are at a peak in the markets. We are at a low in unemployment in the US. There are still a lot of people who CAN come back to the labour force and that is keeping a lid on inflation. There is less inflation than the Fed could wish for. Wage inflation is not driving inflation. Maybe the Fed is not going to raise rates so far and so fast as people thought earlier. Bonds are not a great place to hide out. The PE ratio is just the inverse of an interest rate. He can’t get 4.5% on any bond. As long as interest rates stay low then he is not scared of stocks. It has been a tough year for Canadians – either the CAD$ going up or the TSX dropping.

US Banks. (Market Call Minute) JPM & GS are ones he likes. WFC-N is fine if you don’t think there are any more skeletons in the closet.

Canadian Dollar. (Market Call Minute) It is probably fully valued. It went up 10% in a short period of time and he thinks it will go back to $0.76 by year end.

Markets. We are not expecting to get a statement on central banks unwinding quantitative easing, but rather tightening. We are expecting to hear, however, how they are planning to unwind their balance sheets in the future. The markets are starting to respond to some of these negatives. Japan has a deeply struggling economy. They are buying equities and bonds. He thinks we are heading down the path of what Japan has had to do. This is playing out over decades. It has to do with the aging demographic. Bannon out of the Whitehouse: he was the worst part of the election process. It bought all the worst to the surface including hate. He is not sure it will fix anything, but it is a step in the right direction.

Smart ETFs. In the BMO world they have two niche areas. (1) Low volatility, low beta. (2) A couple of years they got into the quality factor space. When you pay a fee you expect them to pick the best quality companies.

Markets. He is still waiting for the inevitable correction. At some point stocks have to fall. He cannot tell you when, but eventually it has to happen. He is still heavy in cash. The mini corrections simply bring in more buying people. He may be early, but it is going to happen. With the politics in Washington it would be surprising if they got anything done. Not much is going to happen. He observed that recessions don’t normally happen when commodity prices are low.

Cash. You need to hold cash because we are in for some choppy trading. The commodity space is unloved and overlooked.