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

Market Outlook The market is trying to figure out its next trading level. With the change in interest rates and earnings, the market appears to be forming a double top. Now with US long term bond rates going down, the expectation is for a US Fed rate cut in September. The economy appears to be slowing down. Q1 earnings have been okay and the market is losing momentum. He is cautious. The trade war between China and the US and the amount of government debt are the greatest headwinds. Inflation could re-emerge when no one is expecting it.

IPOs? He does not participate in IPOs in general. The Canadian IPOs have not done particularly well.

Near-term, choppiness will continue. He expected a standard 10% correction last September, but in fact a 4-year cycle reset was happening which was the sharp pullback through Dec. 24. Early-2019 was the time to buy stocks, expecting a strong rally. But for the past three weeks he's been warning clients of a 5-10% correction for one or two months, like October-November 2018. Then, there will be a strong recovery. We have more a dip to come to as low as 2,775 on the S&P. Gold: he's been liking it since last summer when it bottomed below $1,200, then he was cautious gold in February-March 2019. Even India-Pakistan tensions didn't budge gold. Now, the smart money is being gold; also gold's seasonality is the summer.

Neither China nor the US benefit from the current tariffs and trade war, and the whole thing is complex. Last week was surprising, since the market expected a deal. True, it was unrealistic to expect all trade issues to be resolved in a single agreement. Trump's new tariffs don't kick in for a few weeks. Who knows what will happen. Monitor it. The strong recovery since December was due to an expected trade deal; the US Fed turned dovish; US data is strong; and earnings were much stronger than expected. So, one factor has done south and we'll see how that effects the three others

This market is bouncing along the rim like the Raptors' buzzer-beater and it will fall through the hoop and score. This spring, company earnings beat the street in the U.S. and exceeded expectations, which is good. Trump lives and dies by the Dow's performance to get re-elected in 2020. Surprisingly, the TSX has been quiet compared to New York. Remember: America buys far more from China than vice versa. China will devalue the yuan which will stimulate their economy. That'll be interesting to see. The Fed has already taken a lot of treasuries off the book, so it's not the weapon they said it was. Ultimately, the trade war will resolve itself, perhaps not this week.

Will the bubble burst with all this QE worldwide? And your thoughts on inflation? "Burst" is too strong. Rather it will be a slow unwind, as we patch the cracks that appear. He's very concerned. Deflation is happening in tech, but inflation is happening in other areas, which adds to being slightly positive, not massively inflationary or deflationary.

Market. The world expected a US/China deal and it was priced in. Now you have to cut about a third or a half of the rally since December. There is some support around 2810 on the S&P but not a lot of support below that. There is more risk than reward in the markets here. There is no potential deal here in the next days or weeks in his mind. Intellectual property rights are going to be the most difficult issue in the negotiations. The airline industry is a capital intensive industry that does not make a lot of money. WestJet is cheap relative to a lot of other players in the sector. A corporate raider is trying to come in to fix things up.

BitCoin's future. He thinks it is worth basically zero. You can trade it. You can speculate on it. You can't invest in it, however. One of the solutions in the world to debt is to move to entirely electronic currency. There cannot be independent currencies. Governments will legislate them away. It is an asset and he has no issue with buying it, but it has no value.

Educational Segment. The income statement looks good but the balance sheet does not. There is $7 trillion dollars of corporate debt rated as triple B. 2000 companies. In the next economic downturn, a huge portion of the capital in triple B will move to double B. Look at HYG-N, the high yield bond ETF. The spread over government bonds is expanding quickly. If you are in high yield bonds, beware. This is the biggest risk he has ever seen in them.

Market. There is a lot of commotion in the markets right now. Beware of headline risk. Separate the short term headlines from the long term story about China. The domestic policy in China is more important than trade wars. China started reflating in the middle of last year and it is now showing in the data. The more trade wars flare up, the more China stimulates. It is very positive. China is moving from an export-led economy to a consumer led economy. Investors should not get sideswiped by the trade wars. China should be speeding up in the coming months. The Chinese consumer is the biggest macro story of our time.

Effect of a Huawei embargo by Canada? He thinks external dynamics are less important to China than domestic dynamics. Chinese tech companies are insulated from the rest of the world because they have such robust domestic demand.

Canadian REITs. REITs in general are good in the portfolio but he would not go 'gaga' on them. Canada has had inappropriately low monetary policy. In general Canadian real estate is very expensive. It is an okay building block because of the income potential. XRE-T groups the Canadian REITs. But there are better opportunities around the world.

Markets. He's a longer term investor. The downturn is not a positive, but it's not going to be forever. Tariffs are only a 2.5% hit to US consumers and businesses. Won't drive the economy into a deep recession. Record low unemployment in the US. We don't buy everything from China.

How much leverage does the US have in the trade negotiations? They have greater leverage than China does. China isn't going to sell US treasuries, as that would make their situation worse. China owes a lot of US debt, and they can't sell it or it would destroy their own economy. Problem is that Trump negotiating through Twitter is backing China into a corner, and China is very proud. It will work its way through the political process, and people will forget all about the recent dustup.

Buy the dip? He doesn't pay a lot of attention to day to day markets. The market's not trading at outrageous prices. Profits will only be down 1.5% this year. The sky is not falling. This is not a positive, and we don't know how investor psychology will affect the markets, but Americans are spending money, so it's not the end of the world.