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

Can we have faith at some point in Canadian tech? Yes. US analysts don't see Shopify as a Canadian name. Canadian companies haven't done as well as US ones this past year. It's a small sector. The US tech names have a regulatory overhang, and perhaps this is contributing to the popularity of the Canadian stocks.

Market Outlook The Fed Chairman is moving the thought process away from a 50 point cut. The market reacted negatively as the Fed may now be trying to pour cold water on the market. You should always structure your financial allocation when emotions are not charged to be able to look at thing objectively. Your strategies should not be driven by short term headlines. He thinks the market sentiment is still fearful and thinks investors have actually taken money off the table. Overall, he doesn't view the market as being frothy.

It's a tough market because corporate earnings are declining, the global markets is softening, yet valuations keep rising. American stocks are diverging from Europe and Japan. Buying the market won't be a good idea with valuations at this level. No doubt that lowering interest rates are driving markets now, but 10-year yields are already down to 2%. Ultimately, you need earnings growth to drive stock prices. The high-yield bond market yields 6% and is in great shape, but to succeed here you need wide diversity across America, so best to use a fund. In contrast Canada is susceptible to commodity bonds and therefore higher delinquency.

Gold He's never owned gold, which he considers a lousy investment over the long haul. A disaster. Gold usually does well when investors expect inflation, but there's no inflation now. Rather, gold is up because of geopolitical fears, but those always blow over. Gold--why bother?

High-yield bond funds Any short-term bond fund will be insulated if interest rates rise. As long it's a diversified fund, if it own US funds, make sure it's hedge. If the Canadian dollar goes up and you own USD bonds you will get hit by a negative currency move.

Market Outlook The S&P500 run up does not worry him. The bull market was in place all last year until the latter half. The market is really going sideways in his mind. He tends to look at US stocks more frequently as Canada lacks the fundamental liquidity. Strength in the US dollar may hurt Canadian holdings, because of the currency, it does help to add to the profitability of US holdings in general.

US Home builders. The US home builders market is still way behind from the peak, despite a rapid population growth. Existing home sales are also not substantially higher. He has chosen the play the space through a Home Dept instead.

Gold now rallying? He likes the recent technical rally and he thinks it could go higher. The US Fed is negative on rates, which would be positive for the entire market. It is unusual for gold and stocks to rally at the same time.

I bought rreferred share ETFs for safety and yield, but their value has decreased. Preferreds are like high-yield bonds. Credit spreads are expanding now, so investors want a premium over risk-free rates. Preferreds act calm, but when they go off the rails, like in 2008, they really go off. There are likely rate-set reset preferreds inside those ETFs, so those resets will fall along with yields, which impacts ETF price.

An actively managed ETF portfolio vs. a managed mutual fund one. There are pros and cons. Mutual funds offer intra-day liquidity, not ETFs. But ETFs offer lower cost. Is paying more worth it?

Be careful in the market now. Investors are over-confident and are taking on too much risk as they reach for yield and returns; these stocks do worse in a correction. Mid-caps are underperforming the S&P by 9% and micro-caps by 22%. Global growth is slowing. Given all this, money managers are investing in bigger-caps and less so in smaller-caps. Not good. Now, utilities and other defensives are outperforming. Consider the risks in these sectors. Actually, the best risk and return is in bonds, especially government bonds (not junk).

Market. He does not think there is anything more important going forward than the trade issues between the US and China. There is an important dinner meeting Saturday night and we will see how that goes. Trump is being urged to take a very hard line on theft of intellectual property. Any deal that does not include China admitting this exists and how they are going to get rid of it will be judged as a soft deal and a non-win for Trump. This is going to become a political issue going into 2020. Trump wants a rate cut. China has less risk in the talks and more staying power. But technology companies in China are going to hurt US suppliers. Regarding Iran, diplomatic solutions are always the best. Trump was initially against war but he is adamant about doing deals and putting his stamp on things. There is always going to be a hot potato in the middle east and that is never going away. Gold prices have soared on the geopolitical tensions, the Fed easing again and the weaker dollar. All of that is bullish for gold and it is one of his biggest equities.

The US 10 years have hit 2% in the last two weeks. This is going to be a big hurtle. 1.5 was the pre-Brexit low and we will hit that when we go into recession. He sold all his long bonds. He is slightly short. He expects interest rates to keep falling.

The US capital markets are the most liquid in the world but from time to time volatility shocks can happen. He loves gold and thinks it is breaking out here. We probably have another 10% in gold and 20% in gold equities. He would prefer a gold equity ETF, although it is not early.

Defensive Move Recommendation. Bond yields are low. He would not rush into bonds. Utilities and staples are expensive. He would prefer to be defensive with puts. Stay in the great companies you own if you want to own them.