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

Market Outlook He is positive on Canadian energy stocks for the first time in five years. He can now construct a positive outlook for the forward value of Canadian energy prices and the stocks have already been crushed -- a good time to enter. In the previous few years, producers continued to grow production not because of good energy prices, but because of prolific increases in production productivity. Now, he is seeing energy production actually falling, while export capacity is increasing. He sees natural gas producers moving back to positive cash flows and earnings. Oil takeaway capacity will move higher by 2022, he thinks. The stock market will take this into account and, over the next six months, will discount the risk to not having enough takeaway capacity. Now is the time to focus on energy.

The market has gone up to the 3000s again, and everyone is getting wary of inverted yield curve, China talks and interest rates. The US manufacturing index showed a contracting economy, but the service sector was up so it is showing economic activity. Consumer spending is also very high, and the US consumers are doing well.

Amazon and other e-commerce makes it so easy for everyone to spend, so it's no wonder consumer purchases are up. He expects the consumer spending to continue.

The TSX hit a high today, but it only regained to the high in April. He isn't selling any growth ETFs, but he's always had covered calls in his portfolio. When there is a surge, you want to switch covered calls to normal equities. Markets are looking to top out so he wants to get advantage of that right now.

Market. We are above the previous record TSX close. What we see in the last week is a rotation from growth stocks to more value stocks. We are going to see the TSX be a net beneficiary of that rotation. He loaded up on insurance but is lagging in banks. The S&P has a nice up and to right trend since 2017. He thinks we will see some new highs but it will also be carried by some different stocks. Copper is in a triangle formation. We have been in a down trend since 2011. Interest rates are at 2012 and 2016 lows. If we break these levels then maybe there is something negative but otherwise the path of least resistance is eventually higher for interest rates.

Silver. He took some profit in precious metals a couple of weeks ago but now he is looking at Silver again. The risk/reward is probably pretty good. Buy a third of a position right now. This is a brand new move after years of heading downwards so there will be some to'ing and fro'ing to come.

US Bank Stocks. If they aren't making you money, then you can sell them. JPM-N has banged into resistance and then snuck above it. The breakout could be quite significant. Hang onto BAC-N also.

European central banks easing again. Easier for banks to lend money over there. The US economy is a better place to be than in Europe. European growth is much more sluggish than US. Though US growth is slowing, it is still growing. Plus, the US consumer is healthier.

TSX flirted with a new high. Sentiment is more positive on trade. The US index is also within spitting distance of a new high. The market reacts positively or negatively, depending on trade news. Expect more volatility until things get resolved. Try to ignore all the noise. The US economy is not as strong as earlier, but the good thing for the US and Canada is that we're seeing consumer spending kick in.

Bond market's wild ride. It has whipsawed, but it has come back from last year. Conveys slower growth. Cash flow is coming into the US from elsewhere, because of negative interest rates abroad, and this drives down US bond yields.

BOC saying we can go it alone on interest rates. Not sure we can do this, as Canada's economy is very tied to the US. BOC is aware of trade tensions. We've seen stronger than expected GDP number in Canada. Employment here is still pretty good.

Sell US banks and move into credit cards, or is there more runway? The banks have had a good rally. May want to lighten up a bit if you have really high exposure. Yield curve steepening is good for banks. If Fed cuts, impacts the front of the curve and so the curve looks better. Keep JP Morgan, which she owns. Whether to double down on Mastercard if you already own Visa, depends how much exposure you want. Also consider diversifying into something totally different.

After recent volatility, can investors now be complacent? No. Whether it's political or trade related. Be aware, but don't get caught up in the noise. Consider how events impact the underlying economy and corporate profits.

Market Outlook If you look at the index levels, things look like they are improving. Under the surface, however, there has been an extreme "rotation" -- a five standard deviation move between momentum into value stocks. Unloved stocks are getting bought up, while strong steady performers are being sold. Monday was the highlight, but it may become a trend going forward. He thinks hedge funds are reducing exposures, so this means covering short hedges. Share buybacks are happening in the market as well. There are three weeks of really solid buying he thinks. Then the markets will return to being influenced by trade talks and politics.

High income ETFs? If you are looking for income, be careful. There are a lot of components in the basket that you might not want to own. You are better to look at the sectors and themes you like and look for high yields there. XLRE-N is a high yield ETF in the real estate sector (3.5% yield), for example. The quality of the holding is more important as you want to preserve your capital.