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

The market is bifurcated. There is high growth that has responded well, particularly non-profit making tech. There are some companies that have proven dividend payout and growth, yet the market does not seem to care for it. He is looking to put capital to work in the best risk adjusted basis. However, we must wait and see still. Asia will rally with a Biden win.

Residential REITs. There is legislation and backlog in landlord and tenancy board that makes it hard to get non-paying renters out. In the near term, there is credit risk and balance sheet risk. Longer term though, people need to live somewhere and REITs could be interesting. Residential REITs would be preferential but in areas with buoyant employment where it will recover. The valuation in industrial REITs are rich, and retail is problematic.

All eyes are on next week: On Monday, we'll know who won the election. What to do? Nothing. We will still have divided government. Oil is a no-go under Biden, but expect better relations between the US and China, like a truce in the trade war. Next week will be unpredictable in a crazy market, but he remains bullish. This week was the best in years.

How should investors play the US election results? A lot of election related uncertainty is dissipating. At a minimum, the "blue wave" has been taken off the table. Investors had been cheering the fiscal stimulus anticipated by that wave, but simultaneously fearing the strong likelihood of corporate tax increases. Divided government is often a good scenario for the market and the market is responding positively to the likelihood of a change in occupancy at the White House.

What about the interest-sensitives? Not all are created equal. Utilities or pipelines own stable, recession-resistant assets with predictable cashflows. If cashflows are valued at a discounted rate, the value goes up. On the other hand, financials are favoured by a steeper yield curve. But a recovering economy would help their loan losses roll over.

How are you viewing today's markets? It'll be key to see if today's action is a one-day wonder and things taper off, or if the strong reaction continues through November. The markets were reacting positively to the possibility of a blue wave and unification of government to enact stimulus. This has turned around, so we'll have to see how it plays out.

Are you making any trades today? Absolutely not. Sitting firmly in place. Positioned for a longer-term view with the background of this pandemic. There's going to need to be a coordinated global wave of infrastructure spending, focusing on the energy grid. Putting people back to work and stimulating the economies should result in big infrastructure spending. The contested election results are just a blip in time.

The day after the U.S. election Growth names roared back today, including tech (Nasdaq bounced nearly 4%). This is one of the greatest rallies he's seen. The election was one of the biggest headfakes in history. It looks like Biden will win, but the Republicans keep the Senate. So he expects years of do-nothing gridlock government. Banks and industrials were crushed today, because the Blue Wave sweep now won't happen. Last week, tech stocks like Amazon and Microsoft were sold off despite strong quarterly reports (crazy), but it's come back in this week's rally. Selling those was a major mistake. The end of the Blue Wave means that drug and health stocks have less to fear; and a smaller stimulus package is likely. All told, this benefits tech, but limits cyclicals. Whoever is determined as president, he expects a peaceful transfer of power.

It looked like a Blue Wave, so investors feared that the far-left wing of the Democrats would lead to socialized medicine and limits to drug and healthcare costs. That would have pressured healthcare stocks. The Blue Wave didn't happen. Today health/drug stocks exploded, even more than tech. Leading up to the vote, investors sold off health stocks as they do in every election, but he had advised buying weakness.

Stocks are up on election day to anticipate the result of the vote, meaning a Biden "blue sweep" of the House and Senate. During Trump's term, China's trade surplus with the US grew 25%. In other words, what corporations and presidents so are different. Essentially, it's very difficult to untangle the complex trading relationships that countries have with each other.

When to use a CAD-hedged ETF? Currencies are like stocks and can be over-owned. Look for underloved, under-owned currencies. ETFs offer a variety of currency hedges in Canada and US. Embrace this hedged view; it's a secret weapon used to manage risk. Active currency management is good, managing risk. He feels that the USD will decline against other currencies, including the CAD, in coming years. Remember that emerging markets have been beat up for years, both their stocks and currencies. However, be unhedged in the Chinese and Brazillian currencies. Hedge to the USD.

International bank outlook Look at the differences between the Canadian, US and European banks. We've had a lopsdied market where people chased tech and consumer discetionary. The US banks have the most lift in the next 3-5 years. Canadian ones are reliable dividend payers with good balance sheets. European ones trade far less in book value. Their dividends are paused this year, but next year will pay 6.5%. The US banks hold more growth in 2021. He's bullish the banks, but would rank Canadian ones here in the third rung.

U.S. elections. Looking at the poll aggregator fivethirtyeight.com, we are seeing a shift to more towards Biden. They may be missing a significant shift of black votes going to republicans, but he still expects Biden to win. Trump is trying to discount mail-in votes received after election day, and he will go down kicking and screaming. Markets don't like uncertainty. There is some post-election volatility that is not fully reflected in the market right now.