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

Market. It's difficult to make any macro forecast with any level of certainty. China is starting to get back to work. Others are looking like they are coming through. The big challenge is all the fiscal stimulus and its impact. Will remote working become a new 'thing'? These are a lot of unknowns. The Saudis and the Russians caused a number of hedge funds to blow up. The oversupply strategy has come to an end. There is a complete disconnect to supply, price, and demand. We may not see a normalized pricing environment for oil until Q4.

Market Outlook The energy sector has been very hard hit and much relief is needed. First and for most, financial backstopping is necessary with banks to not pull out financing away from the sector. The market is one of the toughest with so many range of outcomes possible. Could we see more and more waves of the virus through the economy. It depends on the ability of the government to test, find a vaccine and other support. He thinks the tech sector will be the positive stand outs. You can also look to sectors that will not likely become impaired such as medical devices, healthcare procedures, etc.

Market. There is a real risk of weakness in the markets in the weeks ahead. He is taking a longer approach and thinks he is seeing that in some of the economic numbers. Jobless numbers are still fairly high. 15% of our economy comes from housing in Canada. The number of mortgage deferrals is very high. Canada poses a risk on the housing side.

Market Outlook The Canadian Central bank is seeing stress in the corporate market and has decided to do quantitative easing, including buying back government and corporate bonds. Gold has had a big break out move and one of the only places to be lately. He thinks there are spaces that have also benefited from the at home situation we are in and will likely be the ultimate winners going forward. He sees companies that will also just keep chugging along, some that will face issues and some that you must stay away from. He would stay away from cruise companies and airlines for example. He thinks the market is rebounding in general as the initial shock to the market, particularly regarding credit issues. When the US Fed brought in QE in a bazooka like way and there was Federal legislation to keep people whole, it put floor under the market. You do not want to fight the Fed Reserve.

Dividends at risk? Traditionally companies have done what is best for shareholders and there is a growing movement to consider all those interested -- including investors. If you are relying on dividends for your income, you may want to look to the banks. The government may have a moral obligation to keep cash flowing into investors hands, but there are no guarantees. Trading revenues have been a good offset for bank revenues lost.

We're in a consolidation period after panic forced selling that was too hard. This rebound is moving stock to more realistic pricing models. We got to release the economy at some point. To get back to normal, Canada needs to start focusing on that. Don't be emotional about investing. There was panic in the third week in March, down 1,000 points a day. Each cycle has these emotions and swings. Part of the problem is we don't have enough information to forecast the economy and stocks. In 1918-1928, the start of which was marked by the Spanish Flu. Look at this period for perspective--the outcome doesn't have to be Depression. At least 50 million people died of Spanish Flu. The world is NOT coming to an end. In this period, the Down went from 70 to 380 points. Electricity became common in this period, which freed up people to have leisure time. Today, tech is doing the same thing, also boosting productivity. After the Spanish Flu, the markets and economy took off worldwide. This will happen once we get past this current pandemic.

Why has the Canadian dollar held up so well? He's surprised it has hung in, given the hit that oil has taken. A reason is that Canada has a hidden tech industry and that's kept the economy and CAD afloat. Tech is the future of the Canadian economy.

Gold sector outlook in 3-6 months. He doesn't own gold, just a bit in his RRSP. The best charts on the TSX are gold. He was disappointed when gold sold off during the initial panic sell last month. Now, gold is in a perfect place with cheap lending rates and good demand for gold. The mines can re-open even during social distancing. But he considers gold stocks a trade, not an investment. It's an opportunity now to trade. Gold is in seasonal strength now through the summer.

Market. This will not have been a complete quarter with the COVID19 crisis but earnings season will allow us to put real numbers to the bottom line with what we have seen with this pandemic. You will get a bit of a pass on the numbers from this quarter. The US Fed was an immediate savior of the liquidity crisis after the first fall in the markets. He thinks going forward we will see a distinction between the winners and the losers in the markets. The forthcoming rise will be more selective. Now is a time to reposition your portfolio. It is a bear market rally. Restarting the economy on the other side of this will be challenging. Some industries will do better than others. Massive debts that are being built up will have to be addressed.

Banks. A core holding in his equity portfolios. They are facing pressure and margins will be compressed. At the end of the day, we are not renting these stocks for the next 90 days or even for the next year. They are a leveraged play on Canadian economic growth. They are much better capitalized now than in the last recession.

Perpetual Preferred shares vs. Rate Reset Preferred Shares. Perpetual shares are usually issued at $25 and pay a fixed dividend and it is paid until the issuer redeems the preferred share. The rate reset preferred share is issued at $25 and pays an initial dividend but is reset every 5 years. That market has been hit pretty hard as rates have been cut. The fear is that when they reset the dividend it is going to be significantly reduced.

Market Outlook There is a positive sign in the market over the last couple of weeks with the market looking to establish a floor -- somewhere around 2400 on the S&P, he estimates. We are now only 200 points away from the highs of September 2018. We are seeing a recession coming with large numbers of people being laid off. He sees large sums of cash sitting on the sidelines. The panic selling is now over and he sees a recovery coming of some sort. You have to have a strategy with dealing with volatility. This is done through asset allocation. He began to get concerned with bond issuers and sold his bond ETFs before the crash.

Buy long dated Call options? He usually sells options about 99% of the time as he prefers to receive the premiums rather than pay them.

CAD dollar? He thinks the best thing that can assist the Canadian dollar are pipelines. He would, however, hesitate moving away from the US dollar. We will under-perform the US economy until the commodity markets significantly recover.