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

Negative Rates. ECB Chief economist has said there's plenty more rooms for them to buy more bonds. However, who else who buy bonds with a negative yield? Along with Japan, one third of developed world bonds have negative yield.

He thinks bond interest rate in the U.S. could go lower. If the economy is badly effected by Tump's impeachment or trade war, you could see rates cut. He doesn't think they will go to 0% but could see it quite low.

It's not a big surprise that there is further escalation of trade war talks seeing as it's gone on for so long. China's economy is slowing because they're export oriented, so it would be in their own interest to strike a deal. However, they have to do it without losing face. It's a question of striking a balance.

If there is a shut down of the US government, you could see the USMCA could get lost in the transition. However, there are plans to push it through regardless.

Market. This year has been a very strange year. Typically when you have a year when stock markets are up, investors chase those returns. Investors have raced into bonds of all stripes. Memories of more mature investors move back to 2008 with a kind of investor PTSD. The outlook is one of stabilizing growth – easing monetary policies and a very different set of circumstance. This is the first time that lowering of interest rates has come without any strong evidence of an economic recession. They are being pre-emptive with rate cuts.

Benefits of a Bond ETF. It is a basic liquidity ETF. GICs are locked up. Short term bond ETFs can be bought and sold any time. He prefers to look further afield for yield opportunities outside of North America.

He does sector rotation at this firm. Investors have raced into income in all sectors this year. You would do better in LEMB-Q. Utilities are a crowded trade.

The problem with the global economy is self-inflicted, namely the US-China trade war which has hurt the rest of the world with capex dropping around the world. It's impacted manufacturing, as in Germany (now in recession), but less so in the US and UK. The bigger issue was that interest rates have not normalized, but keep declining.... Peleton's IPO was today; there's nowhere to put money given low rates so they put it in stocks, so companies like Peleton can IPO. Also, investors don't know if we're headed to a recession, and the Fed suffers some confusion too--they're not sure how far to push down rates and how fast or slowly.

India's economy The issue with India, like all EM, is you need a very long-term view. It's one of the fastest-growing economies in the world with much potential. But India lacks China's infrastructure. Modi is going a good job growing GDP. India's tech is a tailwind. Expect volatility, so you need a strong stomach.

Market Outlook He expects the global economies will begin to slow down. Europe posted the weakest PMI it has seen in almost a decade. With interest rates so low, equities have been the place where investors have taken their money. Trade tensions with China are being reflected with the Chinese economy slowing as well now. Both sides have backed themselves into a corner -- it is unlikely a solution will be created before 2020, he thinks. He gives credit to President Trump for stepping up against China taking intellectual theft. He thinks the US Fed did not actually need to cut rates as this takes away the ability to do so later. The stock market will come under pressure when the Fed sends signals it will no longer drop rates.

REITs & utilities instead of bonds? If you are doing it for income and don't worry about volatility then REITs and utilities are a good way to go -- they have more tax efficiency and better yields. If capital preservation is more important, then holding bonds makes sense.

He owns a lot of cannabis stocks. Volatility is endemic; we've seen 8 uptrends/downtrends to date. He's been on offence and defence this year. He holds more cash than usual now though he's been deploying during recent volatility. He looks at the topdown and the bottom-up, especially in cannabis where there are many junior companies. To predict a recession, he looks at the inverted yield curve and other metrics.

The US market is news-event driven, namely the tariff war. It's hard to make a fundamental analysis. If the trade war goes down a dark path, we cut hit negative GDP growth. But he thinks Congress and Trump himself will prevent this. That said, the trade war is definitely a negative. Meanwhile, negative interest rates are messing up the capital--and especially bond--market. There's only so much the US Fed can do.

Are rate-reset preferred shares good for an RRSP? They always talk about preferreds as fixed-income, but they are not. With rates going down, these investments are down 20-25% this year. This badly hurts savers and seniors who need the income. Compare that to a bond which pays 2% typically. He stresses that these are not bonds. He will look at preferreds where they are really, really cheap, not now. There's no tax advantage putting these into an RRSP.