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

TSX He envisions a trade settlement and strength in gold, so he sees another 5% of upside in the TSX before year end.

Market Outlook He is of the opinion that the US Fed will cut rates and this is helping fuel the latest rally in the market. But he wonders if we are pushing on string and might make matters worse down the road. He sees a lot of excesses like crypto currency. He thinks the Republication party is wanting to keep things strong going into the 2020 elections. He thinks the energy sector could be producing up to 5 million barrels per day in Canada if the proposed pipeline projects in and out of Canada would have been completed as originally proposed. Instead the US has increased its production to take this opportunity away. WTI prices are near $80 Canadian per barrel, so things are not that bad. Maybe now is the time to buy when everyone is heading for the door.

The S&P 500 positive news is that it broke 2,950 after three tests in the past 18 months. 2,950 is his support level and he believes it will stay above that. He is concerned about put-to-call ratios being high and the VIX being complacent at 12. The smart money is not confident, but retail investors are--which is a red flag. The market is bullish.

Today's China GDP number is the lowest since the 1990s. The Chinese economy is really growing at 3%. The official numbers are manufactured. Year-over-year numbers are slightly weaker. China is slowing and will continue to. Also, their size of debt has more than accounted for that growth, which means there is truly zero growth. Leverage! The credit markets have never been frothier globally and it will end badly. The global fixed income markets, namely the inverted10-year US yield curve--portends a big slowdown ahead. Considering inflation, there is a negative real return on every bond in the world. The growth outlook is catastrophic for bonds. The upcoming U.S. earnings report will test the currently strong markets. Q1 saw slightly negative earnings growth; Q2 predictions are 2.8% (vs. historic the markets beat by 2-3%, because expectations get beaten down). So, at minimum, we will see flat earnings growth for the first half of this year, at worst, slightly negative. The markets are growing because multiples, not earnings are expanding, because of expected rising interest rates. Not good. Markets could keep grinding higher based on FOMO.

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.