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

Educational Segment. Why has inflation been so soft when we are at full employment? The FED is told to seek full employment and stable inflation. The FED is NOT meeting their goals as of today, however. Both are a little low of target. Labour's share of business profits is going down and so that will prevent inflation. This has been happening for decades. Also, life expectancy has been increasing and so people have to save more during their working years.

Market. He believes that China stimulates their economy. But factories are now getting orders again after pessimism in North America in Q4. We are within 2-3% of last year's highs. The easy money off the recovery has been made. We will see how first quarter earnings are. The economy has to slow down just but the law of large numbers. There will be casualties along the way. We are looking at 3-5% return in the markets for the remainder of the year. We already saw 14% this year. He still likes the US because the focus on new technology is from the US.

People were hasty in calling a recesssion within the year. Only part of the curve was inverted recently. We're in a slow-growth economy, an interesting time with no meaningful inflation despite lots of stimulus the past decade. We just have to keep rates low to keep the economy going--he isn't worried. Bonds are now paying 2% like inflation, so that means zero returns. To build wealth, you have to buy stocks. So much exposure in equity can you tolerate? Your risk level? Dividend players are not bond proxies to him, though. He believes in total return whether it's in a growth or defensive stock. Canada: He tries not to get too worried in a macro sense about trade (talks), though he's mindful of it.

Is doubling up a way to avoid capital gains tax? He's unsure about the question, but most people use capital losses to offset gains. Or you don't sell the stocks (which will defer the tax). Or flow-through limited partnerships are another method, but they are riskier and not for everyone. A lot of junior minors and oils use this instrument.

Is there a geographic allocation recommended for ETFs or just buy a single ETF? His portfolios hold 8 or 12 products, mostly ETFs. That's all you really need. You can build a totally diversified portfolio for a small account ($250K). 25 stocks doesn't match 8 ETFs in diversity and it takes on much more risk. Instead of stocks, spend the extra 25-30 basis points to get ETF that give you global exposure and reduce risk. Also, use ETFs to gain exposure around the world and reduce Canadian bias.

What type of investments to set up for a new baby? Set up an RESP and put in $2,500 each year. The government pays a grant on top of that. The baby will need a SIN. Use one product like the XWD ETF to get diversification (or use separate ETFs to achieve that global spread). At age 10, invest some new money into income stocks. When the child reaches 14, add bonds which are safer investments. In a few years they will use that RESP money.

What's the best way to withdraw money out of a USD RRSP when I retire in a few years? Transfer to a CAD RRSP account and pay the FX charge then or a non-RRSP USD account? You pay tax on the withdrawal, so do you pay that FX charge in stages or all at once? Do you need all that money at once? If not, keep that RRSP USD account open and withdraw some USD. If you will spend all your time in Canada, then you didn't need an RRSP USD account in the first place. However, if that's the case, then move it all into the CAD RRSP account to keep it simple and minimize trustee fees.

Aren't 8-10 ETFs in a portfolio over-diversifying? He keeps no more than 12 in a larger, million-dollar portfolio: Canada US, emerging markets and Europe. He may add say an ESG ETF or a behavioural one (a top pick tonight). No, 8-10 builds a robust portfolio and isn't over-diversifying. Just don't double-up on ETFs.

Keep bonds in a portfolio? What's the best asset allocation? 70/30 stocks/bonds is the new 60/40 because bonds are yielding 2%, but inflation is 2%. You need to invest more in stocks, especially as you approach retirement (and people are living longer, to 80-90). You need stocks, though keep some bonds in there. If you're more aggressive then allocate 80/20. Have more money when you retire than you expect.

An alternative to a RRIF? You can take the money out all at once, but it'll get added to your taxable income. Not great. You can take some/all of the RRIF money and put it in an annuity but that isn't too different from your current defined benefit plan. Your alternatives aren't great. In your late-60s, you have a few years left to do a referral (till you convert your RRSP into a RRIF). Your real and best route is to convert the money into a RRIF.

Market Outlook. A five year chart of the S&P500 shows almost an uninterrupted rally into 2018. A triple top is being made against previous highs of last September has some analysts concerned. The last time we tested these highs we followed with big declines. He expects we will make new fresh highs before the summer begins, which could lead to another bullish phase. A break below 2700 is worrisome.

Market. Most technical indicators he follows have seen a huge improvement since the lows on December 24th. He is waiting for economical data to accelerate to give him the all-clear. He is much closer to fully invested than before. He has moved from defensive back to offensive. Now we are seeing long term indicators that the uptrend is not just a recovery in a bear market but will push to higher highs. Due to sentiment indicators, he would not be surprised to see choppy trading through April.

M&A in Cannabis sector. The pace of acceleration is going up in M&A. He thinks there will be a lot more activity this year.

Canadian Healthcare Space. Biotech is such a hard area to invest in. If they have a single or couple of products, their returns are quite binary. When he invests in these he looks for diversification in portfolios or products out there. He would recommend Knight Therapeutics.

Market Outlook - We are 13% up YTD on the MSI All-Country World index. We are only 2.3% from the September 2018 high. Dovish picture from the Fed helps push the stock market. We could see a consolidation phase here. But if a China-US trade deal goes through all bets are off and it will go higher. In Q1 earnings slowed down a little. Labor market is still decent. Lots of people talk about a recession, he thinks it is more of a soft patch. The reliable part of the yield curve you have to look at is the 2 yr and 10 yr. Historically if you look at that relation in the last 5 times that that curve inverted, the S&P did well after it inverted - didn't peak for 19 months on average after it inverted and was up 22% on average. He is now shifting to defensive sectors like Consumer Staples, Health Care and low Beta sectors.