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

gold Gold has rallied since the pandemic hit. Gold is driven by sentiment. She missed out on this gold rally, but won't chase it here. Today gold is off a lot today. Gold peaked in 2011, so it took 9 years for the gold price to return to that level: a caveat. Also, gold companies don't pay dividends, so they're not income stocks. She prefers growth companies in earnings, rather than owning the commodity. She prefers a defensive utility that pays a robust dividend. In gold, perhaps look at the royalty companies, but she's not interested in gold.

Cashing in a GIC to buy 5 bank stocks or diversify to collect dividends? Can't answer without knowing the caller's overall portfolio. Diversify. The Canadian banks are a good investment though. So, buy a few banks and utility stocks. Look to telecoms for defence and perhaps a pipeline that pays a good dividend. So, buy a few companies in these sectors.

Stock selection, which she forecast for 2020, has borne out. Low interest rates and dividend cuts will drive investors to real estate. We face headwinds: US-China tensions, high number of COVID cases in the U.S. and the U.S. vote. Low rates and low growth with ongoing fiscal stimulus means strong equity returns but--with global bonds yielding near-zero, will spur a lot of capital to chase yield. Some REITs are trimming dividends, like H&R and Cominar. Stock selection is crucial. In REITs, she owns industrial, apartment, data centres and towers, and nothing in retail (too much supply) or seniors housing (too risky and oversupply and increased costs due to COVID) or hotels. She likes apartment REITs, because apartments are very undersupplied in places like Toronto until cities provide more affordable housing.

A remarkable run since the March lows. Deploying capital was easier then. Now, it's harder to find easier investment opportunities. Move in the real interest rates and pullback of the USD makes a case for gold. They are still focusing on North American equities.

Healthcare. He's not a healthcare specialist but there are opportunities in digital health and life sciences. In terms of covid vaccines, they aren't banking on one specific firm. They are focusing on large cap players in the healthcare sector.

Jobs report. Overall numbers were better than expected. The job recovery was always going to be slow. We should not expect a V shaped recovery. In the US, the number of permanent unemployment remained constant. The flexible and furlough are coming back, but there is still a large number of turnover. Markets are back to all time highs thanks to stimulus, which is remarkable.

US Government Stimulus. There is no hard deadline for coming up with a stimulus program. However, the consumer will feel the impact of delays. He expects a deal next week at around a trillion dollars.

US and China Relations. The relation will probably continue to deteriorate. The battle with China will be measured in the next couple decades. The battle is about reserve currency status and technological dominance. The democrats want to take a different strategy by opening up dialogue with China. The fact that the economy is only working because of stimulus is a cause of concern.

Energy. We're past the best-before date for carbon energy. Every peak will be lower than the last. He would reduce traditional energy sources and go into clean energy to play the sector.

Educational segment. We're going to start getting results of the vaccine towards October. We will have an understanding of the efficacy of these vaccines before the elections. There is tremendous hope priced into markets. There is a high possibility that Trump will lose, but the most interesting elections will be in the senate. There are some swing states that will affect the senate greatly. The markets are melting up because of FOMO but there is more volatility and uncertainty looking ahead.

We're on the cusp of a new bull market for oil? Once we emerge from the Covid destruction, we'll exit this year about 4% below prior conditions. It's all about supply. The last 5 years have revolved around US shale. But due to shutting of external sources of funding and investor apathy, shale companies are aiming to grow at most 5% a year. The world relies on US shale, so the future is very different from the past. Saudi remains with a budget deficit on the price of oil. We can get back to $60 oil next year.

The biggest opportunities are in Canadian small and mid cap names? Going forward, investors don't want growth of capital. They want dividends and share buybacks. Low debt levels and low corporate decline rates let them do this. Canada shines in this area. Already seeing capital flow back to Canada. Conditions in a few months will be tighter. His fund is 100% invested in Canada right now.

What do you make of the markets? There's a bifurcation between the economy and the stock market. The economy is slowly improving, but the markets are at all time highs. But that's not the whole story. The S&P peaked on June 8 with the non-farm payroll, and if you take out the top 6 runaway stocks, the remaining S&P 494 are below that peak.

What do you think about big tech? No question, they've done really well. But it's a very crowded trade, so it's becoming extremely expensive. Watch when tech starts to underperform, as that could be a sign that the global market is in trouble. The market doesn't like the anxiety of an election. Usually, the markets dip down from September to November. Investors should be cautious.

Where is the US dollar going? You're always making two decisions: the currency and the stock. Converting CAD to US dollars means you're expecting the US dollar to go up. That's not for the average investor. You want to have a macro picture. US dollar has gone down recently, and is very oversold, so we might see a bounce with the non-farm payroll on Friday.