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

Market Outlook Last year the year end market was much different when the Fed Reserve was too much into the tightening camp. Since then they have eased three times this year and the stock market has responded. He thinks markets will continue to ebb and flow and every ounce of good news has to have a response. You have to step up that much more to keep momentum going. It has been a very good decade, but was not as good as the 80's, 90's or 50's. Stability has defined this market, with low volatility. This can lead to being complacent. He thinks the economy may go into a low growth environment, which may cause rotation into value based companies based on more reasonable P/E multiples.

Housing & Recessions US Housing Starts have recovered back to 1.3 million new starts -- more normal levels. Housing start growth means we are not yet getting close to a recession as a decline in starts has been a good predictor of recessions.

There’s nothing that’s holding the markets back. Some of the volume is down, so he’s sitting on the sidelines though. It’s rare to have rising returns back to back. He’s neutral right now by reducing equities and going into fixed income.

Phase 1 of the US-China trade deal was tepid with little details. There’s finally results of what the trade war has done. The valuations are still pretty high. He doesn’t believe inflation has gone away.

He was expecting to see more tax-loss selling in energy stocks. There have been some significant up trends however. On the earning side, we have to watch the price of oil. If we hit $70 for oil, energy stocks may do very well.

Market. We have seen a massive disconnect between oil and oil stocks. Oil rallied this year but you just starting to see oil stocks lift. The 'truce' between China and the US has taken the demand worry off the table. Investors on the sidelines thinking oil might be a little bit wobbly, last Friday saw the end of tax loss selling was the green light to go back into oil. The mid-cap space was the most abandoned. The real opportunity today is those mid-cap Canadian oil stocks. He is optimistic for 2020.

Brexit's influence on the 2020 U.S. election The Tories' Johnson won in part because voters were scared of Labour's strong left-wing party. The U.S. needs a leader in the middle. The UK election may influence the Democrats' platform.

Too much to hold 4 Canadian banks, consisting of 20% of his portfolio? He's long term. Nothing wrong with this. Banks do incredibly well in Canada, generating 12-15% ROE long term and always raise their dividends. They're well-regulated and diversified across North America.

Market Outlook The market appears to be changing with money coming back into value stocks, not just growth and technology. He thinks there is still lots of money sitting on the sidelines that can fuel the market higher. Yield curve inversions have for the most part returned to normal -- even negative bond yields in Europe are starting to end. He thinks government and personal debt will be a problem, but highly levered corporate debt will likely be the first issues. He has been buying high quality (P2) preferred shares.

Not a fan of the infrastructure space, but at least SNC Lavalin today has put this fraud scandal behind them (by pleading guilty....He's not bullish emerging markets, particularly India which may be entering a real estate crisis; Chinese growth keeps slower; and Latin America is not in great shape...The rest of 2019 will be calm--no interest rate hikes, no hawkish statements from banks, unless Trump says something about the China-US trade deal. We'll end 2019 on a positive note.

China He doesn't own Chinese stocks, because few are world-class and there's no investor protection. China's economy is starting to struggle and is seeing slower growth. He doesn't invest in EM because of corruption and lack of transparency.

Outlook for Japan The Japanese small-cap market has been rallying a lot. A new law has forced Japanese to raise dividends and share buybacks, and Japanese companies now pay a higher yield than the S&P for the first time ever. Private equity.

Orphan stocks that aren't part of the big index are forgotten and mispriced--which is a buying opportunity. A lot of people are buying ETFs and other passive investing; active managers underperform (historically). Fundamental investing is here to stay and will enjoy a comeback....M&A will continue, given a lot of capital in the private equity space.

Tech sector It's been the best performing sector in recent years in Canada and America. When interest rates are low, tech stocks make a lot of sense. You can discount them for 10-20 years when the recurring revenue is here to stay. It's difficult to call the outlooks of giants Google and Amazon, though they've done a tremendous job to grow, though he doesn't see real profitability. He'd rather focus on small/midcap tech companies that are massively underpriced and have tremendous valuation upside--they could be taken out--and easier to predict.

The US has been the best house on the street for 10 years, but with this rally the US is underperforming. Several tailwinds right after the recession (cheap currency, aggressive liquidity) have made the American markets and dollar expensive. Since the recession, we still carry that trauma, so there's a lot of skittishness out there. So, when the market panics, bond yields fall, but the prevents investor euphoria--and that's why he feels we are not in a bubble. US investors have done well since the recession, but not in Europe as well as Asia, Latin America and elsewhere. Trade wars have fulled full-on reflation.