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

Own corporate bonds rather than equities since they will likely be backstopped by the fed. In the US there are several ETFs for corporate bonds. LQD-N is a good one (liquid corporate bond universe) but there is some interest rate risk. You pick up 350 basis points on this. This is not a bad play right now. The FED started buying it last week. Don't broadly jump into junk bonds here.

Real Estate. He would look at apartment dividend equities. Canadian for taxable accounts or globally for registered accounts. ZWE-T is a recommendation for international dividend payers.

Educational Segment. The role of government and how we measure economic success. He is concerned about the path the world has taken to try to fix the issues. We have thrown easy money at them. 6 stocks make 17% of the US market. It is inequality. We need a fix. There is an OECD better life index that looks at how society is doing. He thinks we should measure quality of life. FED funds futures are pointing to negative interest rates. We are going to a money printing world.

Market. We are still in a long term bull market but this is an interruption along the way. Realistically we have a lot of work to do in this market. Longer term we wind up okay. There were no declines where you had a 'V' shaped bottom. Some sectors' performance will be dependent on how long the restart of the economy takes and what hiccups occur along the way. This is a valuable phase for investors because we get to see where the real strength is. This will go on for several weeks dependent on the news flow.

He is short office REITs. He thinks when his lease comes up he will end up needing 55-65% as much space. He thinks it is possible that office space will be a tough sector, as well as retail space. It is a good idea to be short REITs in general.

Market Outlook The market is pessimistic following comments from the Fed yesterday about how long the market may take to recover, fiscally and monetarily. Add to that health experts views that re-opening the US economy may be challenged are causing a pause in the market. She has certain stocks that are defensive in nature. She is avoiding deeply cyclical sectors, like oil and gas. She likes companies that have strong balance sheets to better survive an economic down turn. Technology stocks have participated during this recent rally, but they are too expensive to buy into now. She would recommend waiting to buy in on a pullback.

Time to step in? If your time horizon is less than 1-2 years, you should be staying out of stocks in general. Canadian banks index is down 24% relative to only 13% for the TSX. Bank credit loss provisions will increase and next earnings will reflect losses from April. You may want to begin establishing a position in stages to allow a further buy in on a further pullback. Then buy in chunks as you get a better sense of a recovery.

Investors are surprised with the bounce since the March bottom. We're heading into a recession, but multiples are high, which is a strange situation, because typically multiples fall as stocks sell-off. Also, investors are looking past the recession and directly at the recovery before entering the recession itself--this is very optimistic. He is defensive. Restaurants are a question mark--how will they be profitable with social distancing? Airlines will be down for a while. He looks at companies based on the density of the consumers/audience of their business. Government stimulus and other measures: this aid is needed, but down the road the piper must be paid.

Market. Nobody knows what is going to happen but afterwards they will have a great explanation as to why it did. Advisors, medical and financial, are there to advise and are not there as a crutch. They need to understand the depth of the crisis and the complexity. This is what has to happen or we do not get to some kind of normalcy. Mobility of the workforce will allow us to do more and more things remotely and he thinks we can do these things and be productive.

Market Outlook COVID is not driving the market - it is only accelerating what we already know. Before this we were headed to a recession anyway. The US, Mexico and Africa are the only countries with positive demographics in the years ahead. Oil markets will see demand increase, along with natural gas. He sees game changers in technology, for example, that will allow carbon to be separated from energy molecules. You could see amazing returns in some energy stocks about 3 years from now.

Canadian Banks? What investors want to see is substantial revisions for reserves. Most US banks have taken massive reserves, but they have had an increase in book value as well. Canadian banks will report in the third week of May and he thinks investors will be watching closely to ensure large reserves are being taken. If not, they may lose confidence with international investors. He thinks Royal, National and TD are all getting good support by the market. You are already starting to see separation.

Market. There is this unprecedented fall and then unprecedented rally. There is a lot of belief that we are going to get out soon after being locked in for so long. People are overestimating how long it will take for the economy to get back on track. Even six months from now it will still be trying to get back on track. The economic picture is not really bright. We're back up to 2900 and this is a major resistance level for the market if you go back to 2018. It would make sense for the market to pause a bit. On average the stock market tends to perform weaker and is not a strong period for the market, but it is not where you tend to get big huge gains. 'sell in May'…

Canadian Energy Sector and especially XEG-T. XEG-T is a great ETF to play the energy market overall. It is a good core position for the Canadian sector. Seasonally it is strong until May 9. It is based on supply/demand imbalances. It is not working right now but does not mean it will not work soon. The net seasonal period is late July into early October. When he finds weakness through the summer it often work well in the fall. But he would not look at it right now.

Banks long term. They are well capitalized and have high dividends but if we see this big downtick in the economy then they will underperform. He is worried about residential loan books. Seasonally they should not do well until October and then into the new year. He would not look to add at this time even if it is a core holding.

WTI going into the next shoulder season. There were two things pushing the price down: Over supply and contracting demand. Now we are seeing them raising prices and there is less oil going into inventory. It is hard to say where the shoulder will go. Companies can operate efficiently here. If we get economic numbers we may get a pull back.