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

What is your number one black swan worry? He is worried about a credit situation that does not end well. He is worried about losing triple 'B' companies. Credit problems could cause widespread selling. A lot of investors have flocked to higher yields but that yield may not be there in the future. A major credit event is the thing he is watching out for the most.

Market Outlook - He anticipated that the S&P 500 would go at least to 2,500. But if that level doesn't hold we will probably finish the job. And that is probably at the 2,000 level. The market is 10 years old and is old and tired. He doesn't think it is a huge set back as the classic things that spell catastrophe are not there. Hydro One (H-T) is getting to a level and a yield that can be sustained. But give it a couple of bucks, don't rush.

You said that the downside on the S&P 500 is closer to 2,000 - What is your view on the S&P 500 if the Fed does not raise interest rates and we have a resolution to the trade wars - Outside of short rates he doesn't see interest rates going up. The demand for money in NA is not there. But these factors are not the main ones. The problem in the market is not interest rates but valuations.

Market Outlook First trading day of the year. The market started trading down again. December was a normal correction to start, but got worse. An 800 point down day on the Dow is not of too concern when you consider the overall level of the market. One should have a strategy to deal with higher market volatility. He is going to re-balance his portfolio and will avoid buying junk (like cannabis and bitcoin stocks).

Are covered calls safe in a down market? Covered call righting only protects a very small amount of your capital -- it is only there to generate income -- it is not a hedge. He has sold ZWH-T as he does not want to sell covered calls in a recovering market as it has sold off the upside potential. He might just consider outright buying banks stocks at this point. In a flat market or rising market covered calls are a good strategy.

Buy puts when the market is going down? When buying options (buys or puts) remember that time is your enemy due to price erosion. Rather he looks to buy options ahead of market reaction to a specific event -- like the earnings season. He thinks buying and holding options for an extended is not a good strategy as you can lose 75%-100% of your capital.

When to own Covered Call ETFs? Only until recently would he suggest moving out of coverall calls. However, right now he wants to own the outright equities. This is part of a strategy for volatile markets. He is afraid of giving away upside when the market recovers.

How do you select ETFs? He likes low MERs in general when looking for ETFs -- usually under 10 bps. Don't buy the "smart Beta" ETFs with higher MERs. Look at iShares, BMO and Vanguard websites for more specific information. He thinks many of the higher MER ETFs might close down as there are simply too many doing the same thing at higher costs. He thinks XIN-T is a good candidate for the European markets as an example.

A typically volatile day today. It started ugly, but ended up. That's great, but this volatility needs to stop. He would love a couple of weeks of calm with Trump keeping his mouth shut, so we can build a bottom then go up. We'll get Q4 earnings soon. Oil prices helped today's rally, but PMI data from China was not good. Trump thinks he can--and needs to--fix trade tensions with China. There is a global growth slowdown, but there will still be growth this year. It will take a few weeks, at least, to find calm. If earnings are okay (the bar is so low), that will start to calm markets--and if Trump calms himself too. Markets no longer ignore him--they're paying attention because he effects trade.

Number one black swan worry? A recession way earlier than we think. He's not predicting this; black swans come out of left field. As long as the US Fed slows down and US earnings are okay (and he expects). He sees a recession in late-2020. But we've priced in a recession already lately.

How many interest rate hikes do you think the US Fed will do in 2019? One in the spring and only one in 2019.

Market. We so oversold that the bullish percent index reached the lowest level in twenty years last week for both Canada and the US. These levels give us a benchmark as to where we are going into 2019. In July 2002 a low level was set and then the S&P went up 24%. In 2008 it went up 27% after such a level. In Canada the TSX in 2002 went up 10% right after a bullish percent index low, and similar levels in the years listed above. After this next correction, it is a multi-year low. As an investor you want to hold off until this low coming this summer or late fall. Traders can have some fun in the meantime. This is just a 4-year spike down on the bull market. We've seen most of the correction. It is a strange market but you can take advantage by owning specific securities in the short term. The US index has completed a double top pattern in the last two weeks. It means commodity stock prices will start moving higher. Gold is strong until mid-Dec. until the end of Feb. and that has clicked in. Copper normally bottoms this time of year and then goes higher until May of each year. Crude oil bottoms the third week in January. You need to play the seasons, but remember that the seasons do end.

Were ETFs exacerbating the selling in December? ETFs are a greater percentage of trading activity in markets. Between Christmas and New year, volumes are low and concentrated on retail investors. ETFs have a greater influence during this period of time. It ends next week so don’t be too concerned. Indiscriminant selling due to ETF sales is concerning and was so recently when a lot of computer trading took place. It exacerbated the downside but now it is going to exacerbate the upside going into 2019.

Outlook for oil into the summer. Crude oil has a history of bottoming in the middle of January until May. This kind of volatility on the down side means increased volatility on the upside later. Crude prices are trying to bottom. They should then turn up.

How far will we go down in the S&P? He sees the S&P going up in the first quarter and then below the previous low following that and it will then be a multiyear low for the index. It will be a new floor of support. It will then slowly move higher.