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

Dividends for safety, to sleep at night. Also look at Canadian bank stocks which have sold off 19-35%. Factor dividends and stock appreciation for consistent returns. In 2010, they endured without cutting dividends. They haven't cut them since 1940. He isn't worried about the headwinds, like a weak real estate market.

Are the Americans still shorting Canadian banks? These shorts are quite limited, but attracted media attention. This won't be a short squeeze. He's not worried. The banks have a tremendous track record and did well in the 2008 recession. Post-recession regulation has made banks around the world stronger, including Canada's.

Market Outlook It is amazing to think oil was trading above $40 a month ago. The build in inventories around the world are starting to slow as demand is slowly recovering. Demand had been down 32 million barrels per day. This may mean it will take a lot less time for things to normalize. Apple tracking mileage in the US shows travel is down only about 9% from a year ago. OPEC members too are struggling for survival. Global offshore is going into stagnation due to loss of capital investment. As bad as thing were, the outlook for 2021 is incredibly bullish. Using $50 oil prices, share prices could potentially quadruple. There are estimates that total oil stocks globally went up 450 million barrels, about half of what the IEA had predicted. June WTI futures go off the board next week. He feels it is much less likely that it will settle negative like the May contract.

Market. There is a new cold war developing between China and the US to be fought on the trade front. We expect more of this. Semi conductors took a bit of a hit on this and there is a lot more to come. Equity markets did not like Trump tweeting that he was tariff man back in 2018 and they won't like this. The exuberance from March is running out. The average stock is very much in a bear market.

Just buy covered call ETFs? You should be more diversified including being diversified globally. When you are getting those dividends, remember that they can be cut. He has no other issue otherwise.

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.