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

Market. The Fed has given the market a clear signal that they will not get in the way of the market short term. It rallied 400 points higher yesterday and is going higher today. Don't be afraid of owning stocks. The drop in the S&P was the worst last month for a December. By year-end he thinks we will hit 3000. Earnings drive stocks so an accommodative Fed should ease credit pressure. M&A will happen and stocks can be valued at a higher level with lower interest rates. It will not go up in a straight line in the next 11 months. We face headwinds for earnings, China and the Fed: two out of three have been check marked and it seems like we will get some kind of agreement with China.

Market Outlook - Amazon.com (AMZN-Q) issued a Q1 guidance a little weak and perhaps that indicates slower consumer spending. Consumer spending in a rising interest environment is a theme going forward. Interest rates are still rising even if the US pauses for a while and the global economy is weakening at the same time. That is going to affect corporate earnings. We are seeing also wage inflation that we haven't seen in a while. On this kind of environment you want to really focus on valuation. The safe sectors are consumer staple and health care in case the economy falters.

Any mid-level oil producers? He has not stepped back into the energy sector yet. He needs to see oil sustain higher prices. Longer term, the valuations are very enticing. When investors return, it could move fast. He would suggest starting to pick away and add to them as they prove things are sustainable.

Big rally today after the US Fed held interest rates, doing a 180 from what they talked about just a month ago. The market wanted this. Earnings are a little uncertain. The recent sell-off lowered expectations, which is good. Also, there's a global slowdown, but not a recession. Then there are the US-China trade talks. Both sides have an incentive to achieve something. They should reach some sort of agreement like a short-term solution, but the deep-seated problems will take longer to resolve. Don't panic in these markets. Make adjustments to your portfolio as needed.

After the recent 20% decline, investors are now taking on risk. The rebound has happened. Buy the dips is still the mantra. Over the last 11 years, the US market has been the *only* game in town. Canada and MSCI are small in comparison, dead money really. That said, the darling from the previous decade won't be the darling in the next. Where is the puck going? Over 20 years, Canadian returns total 583% vs. the US 209%, both is USD. Problem those Canadian returns haven't happened in the past 11 years. The lesson: diversification is key.

What are the benefits and costs of ETFs? Are they like GICs? Better than stocks? ETFs allow investors to diversify, the greatest innovation in investing of the past 20 years. They are magic. ETF's have reduced fees, certainly cheaper than mutual funds. Use these to diversify. For example, you can buy the entire Chinese stock market. Yes, consider ETFs.

Core ETF with a 25-year horizon? Risk parity. This mean you have assets exposed to all four of the market regimes, and you're balancing your exposure so you don't any more risk in any one particular market regime outcome. A risk parity ETF will give you a smooth ride. But the challenge is that it'll be very low risk, whereas with 25 years, you can absorb more risk and earn more. Look at VGRO and other Vanguard ones. Also consider iShares.

Should I buy an inverse ETF on the S&P? This is really shorting. The problem with shorting is that financial assets have a positive risk premium--you must overcome not only the fees you'll pay (50 basis points for exmaple) and 2.5% dividend, plus the risk premium (+5 on average). The upshot is: this is really, really hard and a retailer investor shouldn't try it. Instead buy the 7-10-year US treasury (see his Top Picks today) or the 20+ year US treasury. This acts like a short, when you expect market duress, but you got positive risk premia. You'll get the 3% yield and you will gain if the market falls. Look at USD-denominated bonds. Don't short the S&P.

Nice to see Apple returning to December levels (just announced earnings), but it has a long ways to recover 2018's high. There will good volume but may hit resistance at $175. Apple is a driver so it'll help the index traders. US-China trade war: certainly important in relation to the markets, but earnings in the coming weeks and interest rates are bigger drivers. Now, there are many discounted stocks, but the markets in the past year have been confusing with emotional panic buying involved. This results in unusual whipsaw moves. It's difficult to trade this. More certainty would encourage buying. S&P pulled pulled back today. We see support around 2,700 which is a jumping-off point. He's short-term bullish meaning the next few months. Be diversified with hard stops and exit points. Sell into strength. He's slightly bullish.

Relative performance to sector vs. the broad market as an indicator in tech analysis? He looks at volume vs. price. A lot of trading means support at that price. For swing trading, you can use relative strength and short-term moving averages, but he doesn't do swing trading. He looks at relative strength in a sector vs. the index, but this is complicated. He removes the random components from the market, though, to look for a bottoming opportunity.

Market. There have been earnings disappointments. He continues to feel bitcoin is worth nothing. AI is going to be a growth space. China is slipping so it is important that China and the US come together with a trade deal soon. Quality of earnings and number of companies beating is in line but the amount by which a company beats is dropping and that is not a good sign. We have come off the bottom on the yield curve, but now it is flatting again. The Fed seems to be on hold with raising rates. We are heading for a recession and the question is only when.

Where to deploy cash raised in the last few days. He raised a lot of cash last week and the only money he put to work was emerging market debt. It is a currency play that might make 10%. He has just started doing this and will buy more. The ETF is EMM-Q. He has also written a lot of puts in the last few weeks.

REITs. Usually the last thing to fall going into a recession is REITs. They will fall significantly in a recession. This could be a 2020 or 2021 story. If they went 10% lower they might be interesting for a while.

S&P or NASDAQ in a 3x inverse leveraged ETF? He would never recommend it because of the erosion of net asset value. The most overvalued part of the market is the small caps so you could use a 1 times leveraged inverse as a trade.