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

Market Outlook. He thinks world growth is looking like 3.3% in 2019, but there are still a lot of clouds on the horizon -- including traded wars with China. But he thinks this topic will be dealt with positively in the coming months. He thinks US housing is improving too. Oil has moved back to $64 and the oil stocks and service stocks are gaining momentum.

Market. The announcement on Brexit that it is kicked out to the end of the year and then there are constructive comments on the US / China trade relations, which are the two biggest clouds over markets. The big test now is what the earnings will look like. Next week we will know if the market was overextended when it went down in December. We have to see decent earnings for markets to continue going up. Guidance is key and the markets might be somewhat forgiving. JPM-N is not performing as well as the US market. He has fully exited the US banks. He sees the earnings environment tougher because of flattening yield curve. Interest rates have collapsed over the last three months that that is not good for banks. Canadian banks such as CM-T could be down 10% because of slowing credit growth in Canada. You have to time it right in getting out of this trade.

Utilities. Pure plays like FTS-T have performed very well because interest rates have come down so much. You get a pretty stable yield but he has focused on energy utility pipelines because there is better value. ALA-T is on his list to consider and he would look at it.

What a difference 90 days makes. Boxing Day was despair, then it radically pivoted in January as the Fed went from hawkish to neutral. Beware that this can't last. Don't be carried away by fear or greed. The recovery has taken him by surprise. Remember than markets bottom with a W pattern not a V, so the market will retest its lows before finally making a once-and-for-all recovery. This cycle is long in the tooth, but market cycles don't run on a clock. There could be a soft landing like the late-1990's and could avoid an abrupt end. He's balanced between US and Canadian stocks.

Market Outlook Operating earnings for the S&P500 companies have been revised down for each of the last four quarters. This means analyst estimates are falling looking forward over time. It does not mean the end of the world. He would say the market is mixed with Brexit, being offset by better trade issues with China. He would build your portfolio from a place of conservatism. He is about 55% equities. He likes global medical devices and US software and mobile payments. He also thinks emerging markets are okay. The Fed Reserve is not full fledged dove, so he would be cautious.

Short Canadian Banks? The Big Short theorist is showing concern for Canadian banks, and he thinks you should pay attention to this. However, he believes Canada's oligopoly in the Canadian bank space makes it difficult for the same credit cycle melt down to happen here. It is difficult to short this.

PEG ratio? This is the industry PE ratio expressed as a ratio the industry growth rate. You can't trade on it though. It helps justify higher PE ratios for high growth sectors.

The markets year to date are back to fall-2018 highs at 14-15%. Going forward she needs to see a resolution in the China-US trade war and if there isn't, there'll be a pull back. Also, some of the economic data in Canada and the US shows weakness, but the December swoon has recovered in terms of business and consumer confidence. That's positive--they'll spend. From the FED today they said they won't raise interest rates this year. Lastly, with Q1 earnings coming, the S&P consensus is that YOY earnings will be down 2.5% but they may actually be better than that. Trade remains a negative overhang. We need positive profit growth this year to keep going. For 2019, she expects only 3.5-4% overall YOY earnings growth for Q1, but 2018 was strong given tax cuts. She doesn't find super value in the current market and is building cash. We might see a pullback, which will be a buying opportunity.

The 10-year SP/TSX chart points to new all-time highs. We just started a new 4-year cycle. He targets 3,100 for the S&P and 30,000 on the Dow. Yes, world growth is slowing and expects weak data through June. 2011 and 2016 were the 4-year cycle lows while December 2018 was the last cycle low.

What technical indicators do you use to determine entry and exit points? Momentum (any indicator will do). Relative strength (is a stock outperforming peers?). Price patterns: 50-day and 200-day moving averages. Volume to support a move higher; ergo, volume when a stock moves down is a concern.

Expectations of earnings have fallen so companies come deliver at those expectations or higher. Bond yields have fallen a lot, reflecting slower world growth, but the stock market has rebounded a lot of in effect saying that the market is fine. The curve rate is flat, and inflation will remain low. In this environment you can still do reasonably well. The risk to global markets is the difficulty in getting out of QE going forward. How can interest rates rise in a strong market? How can world banks create the buffer they need if the economy declines later?

REITs REITs are one of the best-performing sectors in Canada lately paying high dividends. Apartment and industrial ones have done very well. Some have done poorly, but they are specific, like Boardwalk which focuses on Calgary. It may be tougher for REITs to generate much beyond yields, though, because they have run up so much in recent memory. Also, there's less capacity of apartments coming on. Lower interest rates are a tailwind.

Societe General today is frustrated over the loonie and the price of oil, that the relationship has broken down. The relationship hasn't broken down, but yes, there is a great divergence in the CAD's perforance and the rising price of WTI. One, Canadian oil is very hard to get out. Two, the Bank of Canada says that Canadian and global growth has been slower. Plus, there are housing concerns. These pressures weigh down on the CAD.

Market. If you roll back the clock and review predictions for the first part of 2019, it continues to notch down today. The best is in the review mirror. Something not priced into earnings is the relative strength in the US dollar over the year and that should be a headwind as well. The deceleration in the economy is possibly not priced in or maybe there are better earnings coming due to the FED backing off on rate hikes. We are going to get a resolution in trade tensions with China & the US sometime this year. There may be a significant number of tariffs. The resolution will be a bit disappointing. Negative rate policies in Europe are proving to be catastrophic when looking at financial ETFs for Europe, the S&P and Canada.

Fixed Income. We are in a low down phase and not in contraction of the economy. In the next year or two, ZTL-T or TLT-T are ways to play longer term treasuries.