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

Gold. Not a fan of gold, and doesn't see it going up in the future. Instead of gold, investors are running to the USD for security. Would prefer something that pays yield. Would only trade short-term.

Mixed data on the markets. Last week, Fed didn't pull back on expectations it was going to cut. But now PMI is pretty strong. Strong bounce today. Fed's highlighting that US manufacturing was weak. If you look through the data, they've guided that they're going to cut at least 25 basis points at the end of this month. Comes down to inflation expectations. They're afraid of the market having lower inflation expectations for longer.

US durable good orders vs. inflation. Fed's backed themselves into a corner. The trade war now has run longer than anyone expected. Trade war is hurting manufacturing but the domestic economy is pretty strong, and the consumer's in good shape. Trade policy has moved inflation expectations lower, and that's where they're going to try to cut that decline.

Hedge fund manager Ray Dalio's concerns about the economy and a depression. He's a thoughtful intellectual, but with decades of experience. Level of money printing in the next recession is underappreciated by people. How do you stimulate your economy when rates are already low?

Differential between WCS and WTI. Volatile for last 12 months, and will remain so. Problem is there isn't enough egress to get oil out of Alberta. As long as you have oversupply and problems with infrastructure, WCS will trade lower than WTI. Texas, for example, has built 3 pipelines in the last 2 years.

Gold bullion. Built a multi-year base as the US economy was doing well. Has broken through an important technical level of $1400. Question of what direction gold's going to go is to look at what central bank policy is going to be. Inflation's going to go down, so gold's going to go up.

Current state of the markets. Everything seems to be OK. Yesterday had a pretty good manufacturing number, which made people nervous that the Fed wouldn't be as dovish. But the message from the Euro Fed was that they'd be very aggressive in terms of easing, and so the market turned around.

Fed's performance so far. They were right to raise when they did so that they'd have ammunition when needed. He'd give them an A. The only fumble was last fall when clear that economic data starting to wane. If they'd pivoted in October, the meltdown wouldn't have happened. They did the right thing in January.

Earnings season kicking off. 64/500 companies on the S&P have reported. Earnings coming in pretty flat, which is good enough for the market, with bond yields where they are and the Fed ready to ease.

Inverted yield curve and Ray Dalio's concerns. Does give credence to Dalio, but he's too early. Worrisome sign that Europe is in a downturn. But when the Fed does lower, the 3-month bond rate will go lower, pivot, and steepen the yield curve.

Sell US bank stocks in favour of credit card companies? No. Concern about net interest margins, but they'll be fine. During last 2 rate cuts, bank stocks outperformed the index. Exceptionally cheap compared to their growth rate. So don't sell now.

What catalysts might get the Canadian energy sector going again? Need oil prices to stay here. Different policy out of Ottawa. Need regulations to ease.

The slight sell-off today was due to the summer doldrums during a big earnings week. People are hesitant despite all the market noise. But investors are jittery because we are late-market. This earnings season is important, because it sets the tone for the end of the year. Keep your pencil sharp. The heat is off the health sector a bit following rhetoric from Washington against the US healthcare companies last spring. A result of that was a sell-off in health stocks, but earnings reports are coming in robust. He is more confident about this sector now than just a few months ago. It looks unlikely that Washington will push through new health care policies, like price transparency on TV ads. But expect continued volatility. You have to be in health care now given valuations, tech innovations, developing markets and aging demographics.

How many healthcare stocks should you hold in a portfolio? Worldwise, health care makes up 12-15% of the market, but only 3% on the TSX, and 70% of that is cannabis. Canada has limited choices in health care stocks. A portfolio should hold 10% health stocks, and 15% during volatility.

Market Outlook The US-China trade dispute plays a major role in base metals. However, gold has benefited from the uncertainty. He thinks $1500 is possible for gold. The US Fed might look for a 50 point drop within two cuts. This might be an insurance move by the Fed as earnings have been a little less than stellar.