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

August bruising, calmer in September? Yes, tough in August. Now 1% away from hitting all-time highs on the S&P. Under the surface, rotation away from growth into value. Not sure if it will hold or not. He's in the camp of since interest rates are low, growth is the place to be over value.

Central banks holding steady. Yes, and this bodes well for growth. Interest rates hit a bit of a bottom earlier this week, and the trade moved away from momentum. This is short-lived. Too soon to push the button on the value trade at this point.

Trump calling on the Fed to lower rates. Consensus growth is not too far from the zero line. If US-China trade gets resolved soon, the economy will grind along. It'll push the economy from a 123-month expansion to even longer.

Asset allocation right now. Overweight US equities compared to Canada. US is a bigger sandbox to play in, and the economy is on a firmer footing. No exposure to Europe. Little exposure to Asia-Pacific, but now neutral on that, awaiting outcome of trade discussions. With passive investing, there is some risk if you're too exposed, as eventually you'll want to turn away from those growthier companies at the top.

Is energy having such a tough time because prices are driven internationally? Yes, but there are also pipeline issues in Canada. XLE in the US has started to move up a bit, but he doesn't think it's sustainable.

Seeking value without questioning the P/E. Important to also look at the macro-economic cycle. Recently, banks and US energy have started to move higher. But he asks where we are in the cycle. Those aren't your usual names to move higher at this point. You really want to look at sector and where we are in the cycle.

Canadian ETF that holds only big US tech companies? No, not one in Canadian dollars. There are NASDAQ 100 ETFs that hold tech as well as consumer services and biotech. BMO has ZNQ and ZQQ. Horizons has HXQ. And iShares has XQQ.

To hedge or not to hedge? For the last several years, you wouldn't have wanted to hedge against the US dollar. He still likes the US dollar over the CAD, and how firm the US economy looks at this stage. He still wants to hold in US dollars and have that exposure right now.

Canadian small/mid-caps are neglected and undervalued, and could be acquired by private equity, while ETFs inflate large caps. Also, some tech stocks like Uber are going public at ridiculous valuations--the bubble is now bursting with WeWork.

August was VERY volatile, but he stayed positive and that worked for him. He had a surprisingly good August. A lot of people are worried, but we're already talking about the issues that worry us, so we are sort of prepared. There's Trump twitter fatigue, meaning the market isn't reacting as strongly to his tweets. We haven't seen value names participate, and energy has been tough. Tech names like Shopify are down a lot this week. He expects a 25 basis point rate cut.

Market. Brexit: He sees the UK currency adjusted to be very attractive. He is looking at money going to Great Britain at this point. There are always rules and deadlines. It is a bit of a bees nest. As things weaken and get cheaper he is looking at adding exposure. EWU-T is large cap British stocks & EWUS-T is for small caps, which he is tilting to.

Canadian Banks in a negative rate environment. Dividends are safe in a big downturn but there is price risk. Look at the ZEB-T over the last few years. The banking group has not had any gains and this will get worse in a negative rate environment. We could see a 30-50% correction in banks if we go into a prolonged downturn. He would not plow into the banks just because the dividends are safe.

Educational Segment. Interest Rate Market Globally. Germany just issued a 30 year bond with a negative interest rate. It makes no sense unless you think the currency will be worth less in 30 years than now. QE may not get the positive results in the equity markets that we love. Fixed income is going to be the most challenging question for investors.

Market. He has gotten really cautious. Volatility is building up. Trade wars are affecting companies, and the whole investment climate is freezing up in terms of business investment. We have a crazy interest rate climate. The last thing we want is another financial crisis. This is a time investors need to be really cognizant of companies they are investing in. It will become a very value driven market.

Glorious time for the markets? It's a confusing time to say the least. Throw out the playbook. Negative interest rates change everything. There's both a bull and a bear market going on. Global trepidation, yet the S&P is 2% off its high. Rare to see gold rallying when US dollar is strong. Now with negative interest rates, gold is looking attractive. When all paper currencies are depreciating at the same time, gold makes sense. Bitcoin has more growth, but doesn't have the same acceptability.