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

Can you talk about one ETF that protects from volatility and produces good income - Volatility goes up when you move further from the S&P 500. Health Care is a good area in the US. There are many ETFs in the space.

Market Outlook He is seeing "coincident corporate credit spread tightening" -- the market is asking for less of a corporate premium over treasuries coincident with the market doing better. He thinks the global deceleration of the economy is not as bad as thought. He also sees the Fed in a holding pattern. These two factor don't usually follow. His number one job is capital protection as a result for his clients. He is still under-weight equities. He sees several sectors still not clearly showing things are rebounding. He is still cautious.

US Banking Sector People are watching interest rate futures for a signal of US Fed actions. It is so early in the year and only 5 weeks after the Fed loosened their language. He still sees the Fed keeping liquidity constrained. The US bank sector credit position is pristine right now. The problem is that the banks are not preforming well, relatively speaking. He wonders where the future growth will come from. He would look elsewhere.

He called the current rally in December. Markets spend lilttle time in fair value, like a pendulum swinging between oversold and overbought. Stick to a disciplined strategy throughout. No question we've had a strong start to 2019, but there will be a give-back at some point. Perhaps, we'll see a positive surprise in the economic backdrop as earnings have been constructive so far. 2018 was great for earnings growth, up 25% YOY. He expects around 5% earnings growth this year. Be invested for the long-term now. The cost of doing nothing--due to loss aversion--is very high. Don't be afraid to sell.

Now's the time to pick up some blue-chip stocks, including the tech giants Apple, Facebook plus the Canadian banks after last year's correction. He's generally optimistic. It's amazing how the market has turned in 30 days from the world is ending to a bull market. There's low unemployment and good earnings. Apart from Trump saying something crazy, conditions are good. Valuations went from cheap to the middle now. If China and the US don't sign a trade deal, that will be a negative, but he expects some sort of trade deal. Neither country wants the world to spiral into recession.

Owning stocks in US vs. CA dollars Generally, to own some money in USD is a good idea as a diversification tool. The loonie is more volatile, given oil prices fluctuating. The US is one of the strongest economies in the world, certainly better than Canada's, due to weak performance in western Canada and rising taxes. A balanced approach between CAD and USD is the best. Say the CAD goes to par, then move into USD, and vice versa when CAD falls to 65 cents.

Markets trading higher today in the US. Tale of two markets for the last two months. Trade tariffs with China, corporate earnings growth, rising interest rates and slowing economy in US, which impacted markets down south and in Canada. In January, reversal of many of those factors. Closer to China trade deal, resilient corporate earnings, recession pushed off, Fed less aggressive. Q1 has started extremely strong, and if it continues, provides a good base for equity markets.

Do we need the US and China to reach a trade deal? Equity markets are important to Trump, and a deal will push them higher. We're going to get a resolution with China and tariffs. March deadline will probably be pushed out. It will be a fair trade deal, but good for Trump and his popularity, a springboard to launch the next election.

Earnings season thus far. Earnings season is as usual. Most companies beat because they guide towards a number they can beat. Recent anomaly is that companies have disappointed, but the market goes higher. So the market is looking out 12 months. Corporate earnings are moving higher, just at a decelerated rate. 2019 will move higher and provide a good base for the market.

Hope for Canadian energy sector? No. Alberta curtailing production has helped. But longer term, we have tax, transportation, and regulatory issues. No will at the federal level.

Canadian vs. US banks. Economic growth is one of the most important things for banks, both US and Canada. Growth is greater in the US, and will be for the foreseeable future. Banks also react to interest rates. When interest rates increase, profits should expand as well. Outlook for financial services in US is pretty good.

New Year's rally, too good to be true? Throw out January and December, and pretend we're at the end of November. We have a mid-teens multiple, Fed is supportive of higher equities, strong earnings, and economic activity is still pretty strong. An environment where stocks should be expensive, but they're not. Multiple expansion could give 10% lift, and we'll see 5-6% earnings growth. If market pulls back, use it as a buying opportunity, but be aware of China concerns and Trump's involvement.

TFSA investments. A tax shelter. You want to put in the most tax egregious instruments. So, interest, dividends, not so much capital gains. High yielding instruments. Avoid the home run stocks, because you could lose it all and your tax loss is stuck in the TFSA. Fairly safe things with big yields such as banks, utilties, pipelines.