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

Markets. This is the time for active management. In a fast rising market, active managers will always underperform. It is a momentum driven market. In a gently rising or down market, active managers will outperform. Active managers can hold cash. So many managers hug the index. You have to know what your fees are. You want something with a relatively low fee. Right now the broker only has to tell you what fee they are getting out of the investment.

Buy before or after a split? Investors are enamored with them. Now retail investors are a much smaller part of the market. You don’t get stock splits like you used to. It does not matter whether you buy the shares before or after the split.

Investing in the US. You should not be 100% in Canadian stocks. Canada is just under 3% of the world’s capitalization. Because of takeovers and privatizations, the Canadian market is dominated by financials and resource stocks. He has no idea where the Canadian dollar is going, but a portion of your portfolio should be outside of Canada.

Market. The earnings’ numbers this week are looking good. People were worried about top line growth and whether it is going to come through the last several quarters. Reuters were somewhere between 7% and 9% growth coming out of the US. There is also very good top line growth coming out of Canada. EPS numbers were a little better than expected. Part of that has to do with oil companies actually making money. Even if you take out the oil companies, we are still seeing better bottom line numbers as well. Earnings’ profile expectations were dampened a little going into it, but are actually pretty good. Also, guidance going forward was not that bad. We are going through another week of many, many companies reporting this week, and he expects we will see that they are pretty good. Also, global economies are actually doing better.

Interest rates? Feels rates are going to be relatively low for a longer period of time than people think. What determines the long end of the curve (10-30 year bonds), is where inflation is. Unless you have a dramatic increase in inflation, you are not going to see interest rates go up dramatically. You are seeing a bigger issue that is happening in the global economy, where demographics, low productivity, etc. are capping the ability for an economy to grow dramatically.

Tonight's program is on taxes not stocks.

Markets. There is no shortage of things to look at in this market this week, especially in the US and that is where he is paying the most attention. All markets are saying the same thing. It is not cheap. It is tough for that to have any relevance because we are undertaking one of the most elaborate global monitory policy experiments in history. Eventually we will hit recession. It is important to be watching the economic data points. The number one geopolitical threat is NAFTA. We have to bear in mind that if there is any military activity in Asian we have to be mindful as to what the impact will be on commodities. The home Capital situation raises questions. Who takes on the risk for the home mortgage market? The banks will be very careful of taking more risk on their books. Default rates so far are very low. Banks were down in 2016 due to oil and gas loan books and we saw how that played out. He has difficulty in taking a risk in HCG-T. Some investors are shorting Canadian banks because of HCG-T risks, but he sees this as a buying opportunity. However, be careful that they are at the top of their range.

Boarder adjustment taxes. It is early days. There is a high probability of there being all kinds of negotiating tactics: Softwood lumber tariff – automotive – diary. You can’t reduce everything. If you were risk adverse, you would go toward businesses that were well insulated: businesses that are operating in the US.

Market. The market is now a Hobson’s choice. You either have to take it or leave it. In after hours today, Google and Amazon, which have already had a great move, had another 3%-5% upside in after-hours. You can either stick with the so-called crowded trades, which he is continuing to do, or go fishing in some of the more bargain areas of the market. With new money, he would be very, very careful. It is a very bifurcated market, and you have to be very careful.

Canadian Banks? He is not too concerned about the banks. However, believes that we are going to have a bit of negativity in this space. Still a firm believer in the big banks.

Market. The Russell 2000 (US small equities) has broken out above its March 1 highs, which bodes well for the market. This is important, because when smaller companies are moving up, it typically implies more optimism in the broad market. It would suggest that this could be for the next 12 months. The Fed is still convinced they are going to raise interest rates twice between now and the end of the year. US 10-year bond yields are around 2.33%, and if they move as high as 2.4%, from a techno analysis perspective, it gives a new intermediate weekly buy.

Market. He is a little cautious right now, a little concerned about how frothy things are. Now is the time to go through your portfolio and cull anything that you are not happy with and really make sure your portfolio is high graded.

Energy. Oil is now below $50, but there is a chance for it to get back up to $55. The world is fairly well balanced in supply/demand. OPEC seems to be sticking to their cuts and Russia has joined in. The big fear is that the US supply has been growing. Through new technology, the US has been able to get costs down and production is starting to increase. Feels we are in a $45-$60 trading range for the year. We have gone through 2 winters that have been much warmer than normal, and natural gas inventories have started to build up. The good news is that there has been a lot of industrial demand coming for natural gas in North America. LNG has started to pick up in the US. A lot of chemical industries are now using natural gas. Demand has kept pace with the supply.

Market. We are getting close to all-time highs once again. It seems that every time we have an election, the market rallies. We shouldn’t expect to see a sustained, long rally. The European elections are not the same as a US election. Given that we are at these high levels and entering into the unfavourable 6-month period, this is the time to be a little cautious. We might get a bit of a rally for a few days, but there is still some caution warranted. There are a number of sectors that tend to do well in the summertime, but it is usually not the cyclical sectors.

Natural gas. This has a seasonal period that runs from March into mid-June. So far, we have seen the uptick in natural gas, with the spot price actually doing quite well. Recently, natural gas has started to pull back a little, and $3 should be the support level you should be concerned about. This is just a probability, as it doesn’t always wait for the end to pull back. If it continues to pull back and goes below $3, it would definitely be something to be concerned with.