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

The economy and stock market are separate. It comes down to easing by the US Fed with three interest rate cuts this year. The economic data, however, hasn't been good in the U.S., Japan and around the world. The glass is half full. Trade data in the US and China was better than expected, but only because exports from China have fallen less than imports. We're near the end of the cycle, though without the typical inflation. Point is, he doesn't see where the growth will come from. He's getting tired of getting whipsawed by the US president, tired of playing this game of reacting to his tweets. The telecoms look good, trading at 6x operating cash flow, whereas the utilities and REITs are at 15x. Financials are high-dividend places to hide, but he isn't rushing to buy any banks.

OSFI wants Canadian banks to boost their capital cushion by 0.25% of risk assets. We're late in the cycle, so OSFI is trying to prevent banks from doing stupid things. Overall, this lessens risk for the banks, but also pinches growth slightly. Only if we go into a recession will this be an issue. He's not concerned about it now. As for the Dec. 15 US tariff deadline, nobody knows what'll happen. If a deal was signed, markets would stay this high, but if there won't be a deal, he guesses a 3-5% correction in January. He expects the China-US trade front will settle down then we'll hear more news in the new year. Unless something surprising happens there or something weird happens with Brexit/UK election, markets will rally 2-3% more into Christmas.

Preferred shares and what bond to put in an RRSP? The preferred market got decimated earlier this year; plunged 20% because everyone thought interest rates would rise, but went down instead. Bonds are great to own, but yields are very low now. Look for yields of 3%. There remain nuggets of opportunity. Hard to find and be cautious. Stay with BBB-grade or better bonds.

Market. Brexit. It looks like a conservative majority but that does not solve Brexit. There is still a lot of runway, but this is a hurtle for the market and a conservative win would benefit the markets. There will be a Brexit, well negotiated. The British pound has responded. He is still contemplating selling his UK small cap stocks prior to the election or slightly after. A week Sunday if the December 15th tariff day. He would be surprised if Trump did not kick it down the road at this point, but the tariffs could be applied.

Park money for 3 to 4 months. This is always a challenge. The general idea is that one is not getting enough safe return. If your horizon is 3-4 months, then you can't get into equities. There are high income savings ETFs that have emerged. CSAV, PSA and HISA. They focus on high income savings. You get over 2% interest today. ZST gives you a money market kind of holding.

Put Spread. You buy a put and write a put. You reduce the cost of the downside protection. He would look at doing this. A long put offsets a short put.

US security ETFs clearing in New York or in Toronto yet securities may not be located in the city it trades in. You can buy them in both places and it may impact tax consequences.

In the last 10 years US markets have lead the world recovery. We are at that point where the US is so expensive relative to other places in the world that we will start to see conversion to the US doing less well and international markets doing a bit better.

He has a problem recommending ETFs with leverage in them to an average investor.

His favourite way to play international markets is via a covered call, high divined stock strategy.

Educational Segment. Looking back on the last year. He thought we would get a bear market over this year but it was a brief but deep pull back last December. He said then and still thinks we will not see it in terms of job losses until well into 2020. He said then, and still believes, that the trend of a declining Canadian dollar will continue into 2020 somewhere below $0.70. The Canadian banks may not correct until well into next year. He thinks interest rates will be lower in a year than they are today.

Market. It looks like we are seeing a bit of re-acceleration in some of the global numbers he is looking at. One thing he is excited about is some of the changes in technical top down indicators. He is starting to see improvements one after another in many global markets around the world. Lots of stocks are moving higher, not just a few. The number of stocks in an uptrend is broadening out. There has been a fair amount of tax loss selling in the energy sector but there are pockets that look like they are ready to re-accelerate. In the cannabis sector he has started to see some interesting technical indicators changing and it looks like the Canopy stock may be turning the corner and ready to accelerate as well.

Gold. In some cases it would make sense for smaller companies to merge. The gold price has gone up over the year so now there is more focus on gold. Now you are seeing some mergers are being announced. Junior explorers and producers are now starting to move. The price of gold will depend on inflation, which he thinks will flare up a little. It will be fairly lumpy.

He's bullish, certainly more so in the past few months as interest rates worldwide have eased. You have to look a year ahead, but also don't sell stocks on headline news, like tariffs. Focus on the fundamentals. He holds 15-20 names. When their fundamentals change, then he makes a move. keep defensive names; interest rates will remain low or go lower. He's still avoiding resource stocks, though they aren't a bad trade now; they're cheap and you can move them.

Market Outlook The latest jobs release in the US is bringing a rally. It has been a volatile week. He thinks the market will rally into the end of the month. There are still several black swan issues out there, particularly regarding trade issues with the US and the impeachment process. The Canadian dollar is off over a half percent today, but he does not think this is a new trend. He thinks the CAD will stay between $0.75-$0.76. A new Bank of Canada leader is expected to be relatively seamless, he thinks. He believes, Tech stocks should encompass the classes of digitalization, autonomous driving, 5G, gaming, hardware, data analytics, AI, software, and Fintech.