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A Comment -- General Comments From an Expert (A Commentary)
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Market. Multi asset funds have struggled over the last while. Last year was a whip saw year where we were up and down dramatically. He focuses on structural long term themes. In 1994 he learned not to get too aggressive on the sell side because the recovery comes so quickly. This is playing out again. He made a call to stay with his positions into year end and then they rallied back. Last December's exit from the markets dwarfed the worst 4 week period in 2008.
David BurrowsUnknown
COMMENT
Market Outlook - As macro managers they look at themes and asset allocation and big issues (China, Fed and Trump) is what is going to impact portfolios over the next 12 months. The Fixed Income market is artificial, you basically get 2%. It is in the state since the Financial Crisis. As long as Central Banks hold down rates, it is going to be good for Equities. The downside on Equities was seen in December. That was kind of the floor. It is trading in a channel in North America. International Developed and Emerging is where the value is. A typical client of his firm is between 35 and 40% in this space. International markets are very inexpensive. Single stock is a big risk. When you own an index the performance will track the earning growth. It is not an if, it is a when.
COMMENT
Can you comment on use of ETF for dividend benefit and growth - What you want is a balanced portfolio. 60 / 40 is the classic balanced portfolio. Now they are offered XBAL from iShares or VBAL from Vangard. These things are fantastic. You don't even have to re-balance. He would use this for 2/3 of the portfolio and then layer on top of that. Stay away from the leverage ETFs.
COMMENT
Can you comment on an ETF that reflects just a straight S&P 500 eliminating the dividend tax problem? - He uses the Horizons ETF swap a lot. It eliminates the dividend and transforms that into capital gains. These are total return ETFs. National Bank is the counter party so there is no risk there. Tax efficient.
COMMENT
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.
Cameron HurstUnknown
COMMENT
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.
Cameron HurstUnknown
COMMENT
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.
COMMENT
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.
COMMENT
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.
COMMENT
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.
COMMENT
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.
COMMENT
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.
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