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

How can there be such low unemployment rate in North America in a late cycle? The unemployment rate was extremely low in late-2007 on the eve of the Great Recession and this is historically normal at the end of a cycle. The difference today is the inflation pressure. Late-cycle and full employment should push up wages that forces the central banks to raise interest rates. This time, the Fed went from near-zero to 2.5% which is less than half in a typical tightening cycle. This cycle is very different from the past, leaving the future uncertain.

Educational Segment. Has tech peaked? Paul Desmond wrote a white paper on market tops. He said there are four characteristics including the difference between large, small and mid-caps. By far, tech has been the leading market sector, outpacting the S&P by 10% as seen by comparing the VGT (338 tech stocks) vs. the broad U.S. market. FB and MSFT lead the FAAANGs year to date as Google starts to break down; the other FAANGs are seeing market tops. The large tech stocks make up 95% of this sector while the small-caps are breaking down this year. This is a classic signal of a late-cycle.

The average Canadian doesn't understand how important oil is to Canada, and the way this industry is treated is abysmal. It's tough to wean yourself off an industry so entrenched and will take time. Pot stocks have had their valuations run far ahead of fundamentals; no company makes money. Look at focused companies that aren't all things to all people. There are some good companies. China said today it is growing at only 6.2% which prompted Trump to boast that China needs a trade deal. In this case, Trump is correct. In this game of chicken, China just blinked. However, China plays the long game and may not capitulate soon. China has more time than the U.S. or Trump who faces a 2020 election.

American markets are hitting all-time highs, driven by the expectation of lower interest rates. This is like the tech bubble of the late-1990s. Something is wrong and the market will correct. China data shows continued slowing down there, too, and it's been debt-driven. Markets love the lower rates. Lower rates inflate stocks, and only that. Remember: we've had the most anemic economic growth in this rally since 2009. Gold: he's been very bullish on this. Gold is driven by negative yields in bonds. Meanwhile, there's negative currency moves around the world, ex-USA.

Canadian banks haven't done much except pay dividends. Hold or buy dividend stocks elsewhere? Buy the telcos instead. The banks have underperformed, partially due to American shorting them. He is not long in any Canadian banks. There was a report today of risky real estate in Canada. He asks, Where's the growth? If you own them and receive the dividend, that's okay. But it you expect growth, you won't get it.

Maybe step into Canntrust, now that it's near its cash value, but he doesn't know the specific values and he is only marginally invested in cannabis.

The impact of U.S. debt on markets It comes back to the US dollar, which is up $6 this year vs. world currencies. Some US companies will miss Q2 earnings and those with overseas business will get hurt by that strong dollar. That said, the US dollar is still the default currency, even though rates are really low and this massive deficit. Everyone else is highly indebted as well, so there's no other choice.

The impact of U.S. debt on markets It comes back to the US dollar, which is up $6 this year vs. world currencies. Some US companies will miss Q2 earnings and those with overseas business will get hurt by that strong dollar. That said, the US dollar is still the default currency, even though rates are really low and this massive deficit. Everyone else is highly indebted as well, so there's no other choice.

A TFSA: If one spouse dies, can both TFSAs be rolled into one? Yes. It can't rollover to another family member, but it can to a spouse. Each case is different and unique though, so due some diligence.

Fresh rally, fresh highs in US. He's not excited, he's risk off. If we have a rally, it will probably be the last before there's a correction.

Will earnings season be a shock? We won't see that many misses, but projections won't be that exciting. Ample multiples in the US. In Canada, we're struggling with the resource sector. He believes that gold stocks only work when inflation rises, and it may not get back to 2% for a significant period. AI is beginning to have an impact on costs, and 5G will speed everything up. So inflation may lie dormant for the time being.

The old economic models aren't working. The world economies have evolved away from manufacturing toward service. And AI has added to that. We've had 10 good years of development, and we'll see the results of that, especially with 5G.

Where to park US cash? In a US dividend focused ETF. With the Canadian dollar strengthening, you're going to lose a bit in the exchange rate, so this ETF would make sense. But wait to buy until we see what happens with the Fed, as you might get more with your CAD.

Use ETFs to start an RESP? ETFs are perfect. Though you start off small, you still get instant diversification. ZLB is low volatility with good quality stocks, if you want to be really cautious.

Thoughts on the current market. He's still pretty fully invested. But in any market run up, not a bad time to take profits. Look for dividends, rather than growth stocks. Be a little more defensive. There's enough momentum coming out of the Fed to keep markets relatively happy. But come September, he'd be a little more concerned.