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

The average sold off, as you would expect after Trump's announcement of additional tariffs. Things will get worse before they get better. However, stay calm and carry on.

You only see a past tariff war in the 1930s, and it was bad news back then. Gold is going up, up 2% as a save haven play.

What China is going to do to Hong Kong probably won't be good. China and the US might continue their war until the election next year. It's tit for tat right now, and Europe isn't doing so well. Trump should just concentrate on China right now.

European stocks that usually don't get affected like BMW has many components made in US. In China, they're considered made in USA, so they took a hit today.

Capital position is at risk right now, so look at dividend stocks. If you have profits, maybe should take some right now. Definitely park money in big dividend stocks.

U.S. Dollar. Still the strongest performing economy, and the federal reserve looks to be holding interest rates. It's still a good play in the U.S. China is more hurt by the tariffs than the U.S.

Market. This is a time when investors what to make sure they have all their ducks in a row and the time to do this is now and not when there is a problem. The headlines around the world about the recession might be pre-mature and a false signal. The Fed is saying that the economy is not necessarily heading for recession. They are saving bullets. Manufacturing is only about 12 or 13% of the US economy. Full employment indicates their confidence is high. There will be a recession, and when there is one it could be shallow and not last that long and they could now occur more often than in the past. The roll of a money manager is to purge the emotion of the client. He makes sure he is attentive to portfolio mixes.

A few US Fed chairs have been hawkish today about interest rates which took markets by surprise. Chair Powell will speak Friday 10 am EST and is expected to have a dovish tilt. The markets have 100% priced in a 25-point cut, so Powell can't stray too far from that. We haven't seen clarity since the last cut, though. Economic data is coming softer than expected. The inverted yield curve may not auger a recession, because we're in a different situation this time. More than a third of bonds worldwide are negative, so that's depressing the bond yield. She isn't changing her strategy to adjust for a recession, but is keeping her eyes wide open. Employment and spending are still high; data doesn't point to a recession. For real estate, interest rates are good, but not if there's a recession. If that happens she will look at healthcare and apartments (REITs). In Canada, the latter are affordable.

Can REITs sustain themselves in a low-interest environment? Low rates are good for real estate, and we're not heading to a recession. Investors chase yield worldwide and the average REIT pays 4%. Attractive. Hold onto your REITs, which were the second biggest-gaining class in the US YTD (after tech).

Double-down on a declining U.S. mortgage REIT that pays a high yield? There are various kinds of U.S. mortgage REITs, like agency-backed mortgage securities that are backed by the government, and non-agency ones that pay a higher yield (riskier, no govt guarantee). Also are commercial mortgages for offices and hotels. The biggest risk for mortgages REITS is repayment. A caveat: she has seen such high-yielding US mortgage REITs cut their dividends by 15% in Q2.

Bank earnings. Bank index in Canada has underperformed compared to the broad index, which is a first in 9 years. They usually trade around 9 - 11x earnings. They are currently closer to the 9x earnings range, so it is a good entry point. However, banks have changed and there are headwinds to bank earnings, such as fee compression and fintech encroachment. Still have 5% yield and growing dividends so it is good for dividend investors. Doesn't expect it to outperform largely.

RBC didn't blow away investors with their earnings, and doesn't expect any of the others to either. The quality of the earnings were good, so have to look at each bank individually. Isn't expecting any exciting things from banks this quarter.

Investors haven't been touching Canadian equities, particularly energy, and there is no big upcoming Canadian tech IPOs so there is little money coming into the Canadian equity market.

Preferred bank shares. Given the rates are low, and if the security is a rate reset, you should be careful. Preferred shares are equity and not bonds, so it could be better to buy the individual stock at these evaluation.

Investors flocked to Canada for resources when China was hungry for resources. Now, there is more preference to U.S. stocks. Right now, tech and healthcare is in, but the Canadian market has few of these companies. Could be a good time to buy US dollars if you believe the Canadian market won't strengthen.