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

Regional Banks. He owns two. See his Top Picks today. He likes the regional banks. As we swing to value stocks, money should flow back into regional banks.

He's bullish, though there remains seasonal risk to mid-October. His own Bear-o-Meter indicates that risk is actually declining in the markets which are looking for an entry point as soon as a few days, perhaps a few weeks. But these are trades, not long-term investments, that would last only a few months. The US-China trade deal will probably be settled in the short term, which will result in a market lift. The US election begins in February, so probably sell at that time. That could be the final rally. He is bullish, but not long-term. In late-2020 into 2021 he feels more bearish when a downturn could happen. He likes Europe--it has sold off and is setting up for a buyer's market. Same goes with emerging markets, such as Brazil. These are all places where investors are not (America is a crowded trade now).

The S&P and TSX have hit double tops since June, so when to re-enter these markets? We haven't seen a double-top yet, because the markets need to fall down to the "neckline." Rather, these markets are currently consolidating.

Market Outlook All of Europe, Germany in particular, is looking soggy as exports dry up. US manufacturing is also slowing. We not facing recession just yet, however. Employment figures are showing a big division between service and manufacturing jobs -- service jobs outnumbering manufacturing by 10:1. The service sector is still growing, but wage growth is decelerating. He didn't think today's job numbers were disappointing as the jobs increased by 45,000 over the month. He is watching a US steel story. Tariff increases have led to farmers cutting back plantings, which has led to a slowdown in farm equipment purchases. You have to be aware of the unintended consequences.

Data was mixed for the economy in the US. Tariff wars turned out to be non-productive in the past and this will probably be the case now. He's been reducing equities and focusing more in ETFs.

There's too much emphasis on negotiations because they'll probably just keep going. Maybe the Chinese are waiting for the elections to get rid of Trump for a better deal.

Markets are currently waiting for clear answers, especially for the trade war. It looks like it will escalate. There could be a good correction if the trade war continues.

Market. There is always some kind of drama. This week it feels like something has changed but he sees it playing out in a normal fashion. There has been a bit of slowing economic data and the ISM Service Non-manicuring data has not moved into contractionary territory but is showing signs of slowing. The cracks in the services side of the economy in the US are a sign that what is happening in the rest of the world does affect the US. There is political impact from the trade drama. Trump is in a weaker negotiating position with the Chinese and this will cause a more protracted trade war with China which will be bad for growth. He is a little more conservative with equities. He is gearing his portfolios for slower growth and lower yields. If you get a moderate pull back in the economy, zero growth or negative growth but not a deep contraction you do get a decoupling and differentiation and you can stock pick better. You might consider REITs as they do better in that environment. He is more into bonds than equities at present.

Thoughts heading into October? Past history says volatile, but historically positive. Summer volatility tends to come to an end. Tend to find the bottoms. Load up on the most cyclical assets, as the next 6 months of the year tend to be the best for stocks. Look for signs of weakness to begin accumulating in sectors you want to be exposed to. Probably not at the low you want to be buying yet. Catalysts include Brexit, jobs report, earnings season. Market gapped lower yesterday, short-term double top. You don't want to just buy the dips. Need something to break out of the gap, and if we don't, we're going lower.

Costco's miss on earnings. Critical time for the consumer economy. He still sees a trend of higher highs, higher lows. Costco tends to do better in the latter half of the year.

Price of gold. Long-term basing pattern broke at $1375. If gold broke below $1400, that would be a good entry point. Volatility isn't going anywhere anytime soon. Could go up to $1800 rather quickly.

Seasonal strength for REITs. Seasonality runs through the third quarter, but peaks around this time of year. Coincides with yields that find a low around this time of year. In the summer, you want to search for anything with a yield, like REITs, consumer staples, and utilities. You should take profits now.

What sector could you buy in October and hold until January or February? How about retail. Stay away from exploration and production, but refiners can do well. Technology. Focus on cyclicals that benefit from the consumer.

Market Outlook He does not understand why people are surprised that the slow in global trade is hurting the market. Global trade relative to GDP has been slowing for 5-6 years, outside of a recession -- the first time in at least 50-60 years. De-globalization is an entrenched situation now. The US does the least amount of global trade. As a generalization, anything that slows down global trade also pushes down commodity prices to the benefit of the US consumer. This is causing a global disruption in manufacturing and commodity prices. He thinks there is more downside yet to come. He recommends investing in quality (strong balance sheets and good cash flows). A favorable trade headline between China and the US would probably cause a symbolic relief rally in the short term. One third of the exports from China goes to Europe, making the US less important to China as they only import about 15% of China's exports.

How do remain calm on days like this? Own companies of quality. If the companies you own have strong assets and balance sheets and some prospect of growth you can ride through the volatility.