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

He doesn't see a recession. We had a correction in Q4 last year and a flat market since 2018. We're laying the foundation for a market that will do just fine. The US consumer remains strong, spending money in services (food, entertainment, travel, etc.), and pushing up the real estate market. Manufacturing is a little slow, though the Fed is lowering interest rates. Caveats: Volatility is below 13 now, which worries him, and we don't know who will lead the Democrats. He doesn't like Elizabeth Warren's idea about taxes.

Which bank ETF or banks themselves to buy? Currently, he holds GICs. Buy the bank where you are holding your GIC. It's safe. With a GIC, you're loaning that bank money. Banks are starting to rally now after a weak summer. TD is solid. He also likes CIBC and Royal.

What do we pay the highest option fees in online trading with our banks? It's far cheaper in the States. Because most Canadian banks don't want to trade options, because they're risky. Most of the lawsuits that online traders get come from options.

Market Outlook Markets are in a tentative uptrend -- led by defensive utilities and REITs. Growth stocks and cyclicals have been lagging. From here, the market is either like 2001, which led into a global rally the following year after pausing. Or the market could be like 1999, when growth stocks were expensive and commodities were weak -- value stocks did fine, but growth stocks led the market down. He is therefore cautious about valuations with growth stocks right now. He does not like to buy stocks in down trends, so he is staying away from energies and materials, which is pushing him into trending stocks like financials, industrials and consumer discretionary.

The best energy pumping company? This is a challenging environment for any energy holding. The pumpers are driven by the health of this space. He would not hold any of them today. They are being moved out the index, because they are too small.

If not banks, maybe utilities? He would continue to hold Bank stocks. Utilities could suffer if we continue to have a "normal" market and interest rates begin to rise. He does not have a holding in Canadian banks, they hold US banks, insurance or mortgage companies. Yield 4.8%

Markets continue to go higher as long as there is advances in defusing trade tensions. The yield curve is now sloping positive, the Federal Reserve keeps adding to their balance sheet. Job markets are robust, and seasonality is good. Earnings are beating expectations.

The yield on the S&P 500 is around 1.9%. The 10 year in the US is 1.73%. When this happens, stocks usually go up as long as trade talks continue.

The multiple in the market is reasonable. They probably engineered a soft landing. If global PMIs pick up, maybe there could be 3 or 4 more years of this cycle.

Are interest rates going to zero? He doesn't think we would get to 0 but they will probably go down.

Market. EnCana, it is part of a slap in the face to Canadian energy. Even TransCanada pipeline has changed its name to TC energy. Canadian companies are shifting their operations south of the boarder. This is financial engineering and you have the same business and the same results and the same management team. It is a lot of wishful thinking. They are desperate as many energy companies are. ETFs cause a lot of fund flows to go into stocks that are into the indices. It remains to be seen if this gets their stock price up. He is not playing impeachment proceedings in the US.

Strategy to buy Large Caps with dividends 4+% instead of bonds. The bond market surprised everyone this year and performed shockingly well. Utilities and REITs have become expensive. If you have a long time horizon it makes sense to buy the large caps for dividends. Corporate bonds give you a much higher coupon and you can get a much shorter coupon than government bonds.

How long can this party continue? Day by day. Word "recession" is being thrown around. Third rate cut from the Fed this year. The US 10 year, which real estate tracks, is down over 90 bps this year. Real estate in US is up 27% this year. Lots of investors are rotating into defensive with yield, which is exactly what real estate gives you.

What does Fed rate cut mean for the Bank of Canada? Most analysts are saying it's only a matter of time before it has to cut. We're getting to that point, but not sure if it will be the next meeting or the one after. But it's hard not to cut when everyone else is. It still has a bit of room.

Are there any black clouds over the particular space of real estate? In North America, REITs look fairly valued. But looking out further, returns will be driven by earnings growth, and less multiple expansion. You're looking at a low double digit return, but still positive. Headwind is rising rates, and investors rotating from real estate into cyclicals. But that's a buying opportunity.