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

Market Outlook He likes to keep an overall portfolio that is market neutral. The FANG stocks has really driven the second half of this bull market since 2019. Canada's resource market has not favored well in this cycle. Over the past 20 years things are a little better for the TSX as the resource cycle flourished. He sees the regulatory environment being the big issue for Canadian energy stocks.

The fundamentals are pretty good. However, the political environment with US/China trade tensions, Mexico trade tensions, Brexit, may be causing some growth or expansion plans to be postponed. The trade tensions need to be resolved quickly or could start seeing some real harm, the recession may come sooner than later. These trade issues are very disruptive.

Market. There is always a story and always a worry. He views the trade stories as transitory, even if serious. For the long term investor to react too violently is a mistake. You should have set up a mix to get you through times like this. Trump does not want a weak US economy going into an election. If the trade war continues, the FED has shown they have the backing of the markets and so we could see cutting of rates as the trade dispute effects the economy. The markets are reacting as though it is a lose on both sides. Consumer products companies have to reinvent themselves. Valuations on these slow growers have been too high. It is because interest rates were too low and they increased dividends to create a yield to compete effectively with treasuries. One is a riskless asset and the other is a risk asset. You can't view them as the same.

US Banks. The industry is a little in flux because of the environment. The FED did a flip flop in January with interest rates. When you make these mistakes the market reacts. Now we are in a falling rate environment and it is not good for the banks. BAC-N is the most levered to mortgage rates. He lightened up on his banking exposure about 3-4 months ago.

Market right now. Great year for REITs. Global REITs are up 12% YTD, and Canadian ones are up 14% total return in line with the TSX. Driven by decline in 10-year bond yields, earnings growth has been pretty good, and lots of uncertainty in the market. Real estate benefits from being defensive in uncertain times.

10-year yield dropping below short-term. Especially for housing stocks, this is the boon that they need. With interest rates so low, there should be more buyers hitting the market.

How much leverage does the BoC have? Unless something dramatic happens, it should be steady state in Canada. The US is excited about a rate cut, but it's driven by trade uncertainty. If Trump fixes this in the next couple of months, and Powell was to cut rates, the market will do quite well. Economic indicators are very strong.

Performance of global REITs. Going back to Dec 31, 2002, global REITs have outperformed both global equities and global bonds. Real estate had a significant growth capacity compared to bonds.

What REIT sectors are grabbing your attention right now? Really likes 2 sectors, apartments and industrials. Bearish on retail. There's a significant under supply of rental apartments, especially in urban areas. Industrials, such as tower REITs and data centres, will benefit from the e-commerce revolution.

Should you buy a property or buy REITs? Separation between the two. Just because you own a cottage or house, doesn't mean you shouldn't own REITs. Opportunities for both in your portfolio. Three reasons to own REITs: 1) over the long term, global real estate has outperformed; 2) REITs can outperform even in times of rising rates; 3) many Canadian retail investors are underweight real estate.

Owning REITs vis a vis interest rates. Common misconception that rates are rising and you need to exit all of your REIT positions. In times of material rate hikes, US REITs have generated positive total returns 75% of the time, and outperformed the S&P 53% of the time. With Canadian REITs, since 2000 they've both generated positive total returns and outperformed the TSX 100% of the time. When rates are rising, you want to shorten your duration such as for apartments, hotels, and industrial. For long-term leases, you wouldn't be able to capture that growth in the economy. Thinks interest rates are going to be pretty low globally for quite some time, and for REITs that's good.

Northern Ireland property, residential and commercial? Concerned about northern Ireland, because of Brexit uncertainty. Prefers Dublin to Belfast. It's the booming city, especially for the tech sector. Dublin needs over 30K homes a year to keep up, and there's a significant shortage. So homebuilders are also a good bet.

Market Outlook It is difficult to sell all your stocks because you fear a trade war impact on the market. Don't move stocks into bonds as yields are too low. Diversification is key. Look for holdings with above average dividends. He still holds Apple and Alphabet. The FANG group has really taken it on the chin, but he will continue to hold. Apple employs 1.4 million people indirectly in China -- they are far from a massive restriction on them. The US election will take centre stage as Trump wants to focus on the success of the economy. At the end of the day he expects Trump would back away if it threatened US markets.

Current market turbulence. The equity shoe is beginning to drop. Bonds are really stretched in terms of this is the beginning of a recession, and assuming Fed rate cuts, but he doesn't see any evidence of that.

Concerned about the yield curve inverting? Not really. Used to be seen as an indicator of a recession. Fed is not over-tightening. Next best thing to negative yields is the US 10-year and so investors pile in, plus China trade, and so we get yield curve inversion. Probably not a sign of a recession in the next few months.