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

September outlook using technical analysis by Carley Garner - https://en.wikipedia.org/wiki/Carley_Garner So far, this September is in line with seasonality, as ugly as it has been. It's possible we could see a very bumpy ride to the end of the year, though there may be short-term upside coming. IN march, the S&P broke below its Dec. 2018 low as the Nasdaq held on, then the Nasdaq started rolling, breaking resistance (last seen in 2017) in July. To compare, the S&P tested its resistance only last week then immediately broke down. Both indices have given great returns, driven by FOMO and momentum. As long as it holds above its support at 3,280, the S&P can ride higher in the short term to all-time highs. Long term though, while the Nasdaq's RSI has broken higher to a new high, the S&P's has not. A weekly S&P chart shows this. The S&P's RSI couldn't break 67 even though the S&P made new highs last week. A similar thing happened in January 2018. But there's a strong ceiling of resistance at 3,660 and it's unlikely to break above that. And what if it the S&P fall below 3,280? Answer: a furious correction to as low as 2,750.

Canadian vs. US banks 5-10 years ago, he owned both kinds of banks after the recession because they fell to such low levels. Great investments then. Long-term worries now are that interest rates will stay low, which will limit banks profits. The valuation compression on banks will be long term. He still owns TD an RY, and in the States, Berkshire Hathaway and EVR. When the economy recovers, so will the investment banking business. Banks are still good to own for long-term investors to collect the dividends. For now, be cautious with the banks. He's underweight.

After the tech run-up this summer, we were due for a pullback as we enter the fall. There's still uncertainty over restarting the economy and whether cases will increase this fall, plus the US election. It's natural to pullback now. He's still positive long term and expects a good buying opportunity this and next month. He's getting ready to deploy capital in the coming weeks after raising cash. He isn't buying today, but waiting. Another 10% lower he will buy. The rise since March has been so big. There's a lot of cash on the sidelines waiting to get in. The oil sell-off: there was a natural bounce-back in oil driven by the reopening of the economy. The move down now reflects economically uncertain times. Oil remains a bellwether of the overall economy.

Market weakness. He believes we will continue to see weakness in the next couple days. Markets have largely given up the gains from August in a matter of days. It's probably healthy to see a correction.

Tech bubble. There are different pockets of instability in the markets. Fundamentals have not changed but there is more expectation in the market now pushing the price higher. The companies today like Google or Amazon have good cashflow and are redeploying capital to grow. It is more by stock than the broader market.

Sell off. The markets are very expensive, especially thinking about the market cap of Tesla being larger than the rest, or that FANGS are larger than most economies in the world. In the next while, we can expect investors to take some profits.

Employment. Employment numbers were on expectations in the US and Canada. Permanent job losses are going up however. Things will restructure in time but in the short term, there is deep change. It's a bifurcated markets with the real economy not matching up with the equity market.

Educational Segment. When comparing the highest rated companies (AAA and AA) to the lowest, they have all recovered to an extent. However, the B ranked companies, junk rated, recovered because of the implied government support. These have a 10-15% bankruptcy rate. High quality companies have consistently outperformed.

What's the catalyst for the selloff today? This market is so extended to the upside, you can't point to anything in particular. Sometimes these markets sag under their own weight. He's been getting more defensive. It's a tough market, as there are tailwinds, but it's so extended. Sees some risk in the growth stocks.

Are people losing faith in the work-from-home revolution? Reminds him of the crash of 20 years ago, when a lot of the tech stocks didn't achieve their highs again for another 15 years. The stocks were so ahead of their valuation. Zoom, Tesla, and Shopify are in the same situation. You're paying a lot today for future growth.

Government softening towards the telecoms with diminishing threat of lowering prices? That's the risk going forward. It's a volume-driven business, and prices will come down. Not a big deal going forward.

Could the selloff be just seasonal jitters? Valuation will matter. You can have a great growth period, but how much are you paying ahead for it? Interest rates are the biggest risk, with debt where it is and the amount of expansion. Any increase in interest rates will knock down multiples pretty substantially, and the growth stocks will suffer the quickest and the hardest. You'll be facing Wile E. Coyote-type air underneath.

Reaction to Altice USA offer to buy Cogeco? Offer seems relatively fair. Shares are relatively undervalued in the market, so the premium was offered as enticement. A long way from being a done deal. Telecom returns haven't been that robust over the last little while, so it represented a good chance to take some profits.