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

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.

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.