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

How do you decide whether to keep holding a stock? You can trade in this environment. You have to switch gears. Let's assume it's a bear market, you have to look at ways to peel the stocks you're less long-term bullish on, and you can trade the swings. Or you grin and bear it and hold out. You can use momentum indicators to spot overbought and oversold opportunities.

Technical analysis on the TSX composite. He was looking for a bounce to trade. But it fell, so he's glad they didn't buy. Might likely see a bounce in the next 2 weeks, but you'll only know it's the real McCoy if it goes back above the old support level. So, look for the bounce, but then look for some follow through.

Short stocks? He doesn't short stocks, because there's a lot to it. But he has bought inverse ETFs. He's a mid-term player. He's 90% onside that this is a bear market. It's pretty oversold right now, so he probably wouldn't enter his shorts now, but wait and see if there's an oversold bounce and then decide.

Market. US stocks were the only market in the world that was going but that has now changed. Stocks leading the market are now expensive. These stocks heavily weight the market index ETFs. The FANG stocks have weakened off and they are not leadership. Things are vulnerable but we could get a reaction rally, such as a Santa clause rally. Interest rates, inflation and so on are all worries for the market. Nobody knows where to go and cash looks like a good place to be. This is a time for caution. People who are positive about where markets are going have to change before things will change.

Energy Sector. It has been a long time since we had a recession and we are overdue for one so he cannot rule out one sometime next year or the year after. Oil is a commodity and commodities are poised to go down. He has SU-T domestically. He is underweight energy holdings. He does not think you should put more money into energy.

US Debt. The US is viewed as a safety haven. As stocks come down, money goes into US bonds as a flight for safety. Money comes out of Canadian Preferreds also. Rate resets have come off quite a bit. You could buy US treasuries if you thought the Canadian dollar was going to weaken.

He's looking at the credit markets. Credit has been weaker than equities all year and has accelerating this week. Until those issues are solved by the US Fed slowing QT, but rather re-adopting QE. This is likely the end of the bull market. The catalyst was the central bank stopping QE. Overall, this has and will reduce M&A with companies becoming less attractive to private equity. Corporate buybacks will slow down, too, and will also stop fuelling the bull market.

Liquidate $250,000 in stocks and wait out this market downturn? He doesn't give portfolio advice, but he sees trouble ahead. The credit cycle has turned, and interest rates will--THOUGH the U.S. Fed may half further rises if the economy sharply downturns. That said, this market is grossly oversold. If we're entering a bear market, this is only getting started. He's read that 90% of CFO's expect a recession by end-2019. A downturn doesn't start this fast, though, and usually has some sort of bounce back. We'll see.

Market Outlook He sees extreme oversold indicators in the market right now. The market has discounted a deep recession for next year, which is good, he thinks. Now the market looks forward and there is great opportunity. Looking at corporate earnings and GDP growth he is not too pessimistic; rather thinking that a lot of the issues concerning the market are transient. You need to take on a non-emotional view of the market. His balanced portfolio is about 6% above his benchmark -- he is pleased with his performance this year.

Market Outlook - These are very unhappy markets. Everything suggests that we are in a bear market. Oil is falling, this sort of volatility, rallies that won't hold, this looks like a bear market. It looks like a bear market, smells like a bear market, most of the rest of the world is probably in a bear market; the question is when stocks have corrected to this degree as long as there is no recession coming you have to start buying. You want to de-risk if there is a recession coming. The thing that is still inexplicable is the coming off the quantitative easing. He doesn't think there is a recession coming. You have to be at your long term asset allocation. Some of the best stocks in the world have gone on sale. He may be selling the Fortises of the world and some REITs that swelled. Buying stocks that are increasing their dividends at one level but 5 or 3 or 1 year from now the value is back where it should be, it is a powerful formula

S&P 500 has been down 13% from the September high. We want to hold the February lows at 2,530 and now we're barely above that. Indicators say the market is really oversold, even though some economic numbers are really good like retail sales and the China-US tensions are seeing a detente. If the market can bounce off the 2,500 low it's very good news. The equity put call ratio is at elevated levels--there's a lot of hedging going on. Everything is set up to have a great run, but fear and greed can push the market even lower. That said, all we need are a few days of positive push to have a good, few months. He's guardedly bullish.

Tomorrow's last rate decision by the U.S. Fed: It'll likely increase by 25 basis points. If Powell doesn't do it, it'll be a downer. What they'll likely do for 2019 is a wait-and-see approach, which is fine. Instead of 3-4, it'll likely be 1-2 hikes. We got a reprieve on today's markets, but we won't get a Santa Claus rally this year. Market sentiment is terrible. Earnings momentum has rollen over; it will go up in 2019, but at a lower rate than this year. Another question mark is the China-US trade war. Liquidity gets tight in December. Money is coming out of the stock market in December this year with few buyers this year.

Market. He thinks the US president has to stop trying to interfere in the FED because is it makes it hard for them to be wholly independent. They are not going to cut interest rates here. Yes, a yearend rally is coming because we always get one. The question is to what level. A five percent rally is the most likely. He expects a very dovish rate hike in interest rates. He is relatively long but not bullish. He is playing a trading bounce. Once we get that bounce, he is back to extreme defense.

When a corporation has added a lot of debt on the balance sheet and we go into a downturn, credit contraction and expansion is the factor that influences the growth. Extra growth above the 1.5% due to population, in good times, comes from extra borrowing to invest. During bad times we go below that 1.5% growth to make up for it and that is a recession.

GIC or a good Bond ETF? You need a way to get out of a GIC. In the next year to a year and a half there will be a phenomenal opportunity to buy equities. In a recession, bonds DO have positive returns. If the FED unwinds the balance sheet, there will be extra supply. There is a case to be made where bond yields don’t go much lower than we have seen.