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

The US Fed Reserve decision today puts the market on a different path for the rest of the year. Rates are just below the “neutral range” said the Fed, which caused a massive market rally. A rate hike in December is still probably priced in. He thinks the US Fed should be hiking with the state of the hot domestic economy. Trade tensions could heat up again with a weekend G20 meeting of world leaders. He thinks there have been positive statements out of the US ahead of the meeting that a deal might be struck with China – but expect the unexpected. He continues to like Canadian Financials and Industrials.

In the credit market are spreads finally widening, and at a rapid pace this month. Global central banks have supported markets with very low rates, but that's been changing as they raise rates. He expects continued declines in equity markets and likely a recession in late-2019 or 2020. The U.S. tax cuts benefitted businesses both short- and long-term. He doesn't see significant inflation in the near future.

Junior mining sector Precious and base metals: If we enter a recession, be long precious metals, and be short base metals. Among base, he likes zinc (i.e. Hudbay Minerals).

U.S. vs China trade war: This is a president who believes himself to be emperor. If he wants to put tariffs on Europe or doesn't like GM, he doesn't care. We've never seen this. If you're going to wait to see what Trump will do, you'll never invest at all. He's holding only 3% cash. He's slow to reinvest, though, and has taken some profits, but he believes there are always opportunities. He liked Scotiabank's results today--very good with 16% growth YOY in Canadian, and glad they divested their Caribbean operations. They're trading at less than 10x trailing earnings. Canadian banks as a whole are cheap and Scotiabank will grow. In contrast, he's bearish oil. He's incredulous that Ottawa hasn't solved the pipeline problem as Alberta oil companies go under and the country loses millions each day in revenues.

The U.S. Fed's announcement tomorrow He expects Powell to say he'll stay the course, meaning 2-3 interest rates increases coming, though it'll depend on economic data and if there's an economic slowdown. Also, keep an eye on U.S. housing starts, which are flat. The US Fed could pull back the reigns pretty quickly.

Berman's Call was pre-empted in its entirety by GM announcement. .

GM announces it will close the Oshawa, ON plant: It's sad because it was a major plant, but the reality is that the industry is changing, moving towards e-cars and other things. Look at the rise of Tesla. Oil prices and markets today rebounded today. Our economy is doing relatively well, but our oil situation is beyond a nightmare--look at the WCS discount vs. world oil. This crisis will be addressed short term with more rail transporting oil, but we still have issues to deal with (namely pipelines). He hasn't seen selling like this of Canadian oil. Meanwhile, the U.S. tax cut was a mistake. Sure, it juiced up the American economy, but it really just amounted to record stock buybacks by corporations -- it didn't trickle down. Meanwhile, the deficit is rising in America and will continue to. Canada should not go down this road, even if it scores political points.

the logging industry U.S. housing is rolling over, based on data. It's negative. Same goes with China. Settling the trade issue could help lumber. U.S. housing as is good as it gets in this cycle. Canada faces more of a chance of a downturn than America

Sell Canadian banks now? No. Hold them. He isn't worried about a collapse in this sector. They'll be safe in a downturn. But he's concerned about growth in the future. Analysts are too bullish about Canadian banks. Their loan losses are at record levels and Canadian consumers are heavilty indebted. You're getting a decent yield. They're safe.

Are we heading towards a bear market? He thinks so. Earnings growth estimates are slowing down. Margins are at all-time highs. The strong US dollar is hurting overseas markets. Chinese stocks are down 25%; Europe down 15%. We no longer have zero-interest rates. ETFs have sustained past growth, but those haven't been tested in a market downturn. We could still test the February lows, and what catalyst will drive markets higher?

Market Outlook. He has been waiting for the correction that happened last week. Trade wars, ballooning deficits, telegraphed interest rate increases, all predicted that this would happen. He thinks the US tax cuts kept the market up this long as these cuts flowed through to earnings. He would not be sounding the all clear yet. Today is an up day. Volatility is increasing. He doesn’t think the next 12 months will be too great.

The current market dynamic tells him that the market is showing a lack of interest in bonds. Usually a sell off would have resulted in bonds rallying. ACWI and ACWV ETFs are indicative of global markets, and the current trends show we should be managing our portfolios in a very risk conscious way. We should expect higher volatility and lower returns on capital. The theme now is how to take a protective position with low volatility – reducing beta.

He's embracing this volatility. He raised a lot of cash before the fall dip and bought aggressively. He even called for a drop in oil. Oil had plunged because of a supply glut. But we are now at a turning point. Supplies usually rise in mid-November, then decline to year's end. We should've seen stablility around $55, but we broke below that. Seasonal weakness usually ends around early-December.

Why is a 200-day moving average so important? Instead of looking at daily swings, investors can look at this. Long-term investors should look at the 200-day. Intermediate ones, the 50-day. Short-term ones, the 20-day. The markets have traded below the 200-day, which means upward resistance. If this stretches too far above or below means the price could mean-reverts, which spells opportunity, as in January 2018 when the average shot up, then suddenly corrected. Recently, we could be seeing a trend of lower-lows and -highs. Watch the 200-day closely, because if it doesn't break above that, we could see pain ahead.

The 200-day chart of the S&P 500 We're beyond the high-growth phase in the economy and now in a moderating phase. There are still higher-highs and -lows, but momentum is flagging. We're not facing a recession tomrorow, but we are definitely in the late stage of the economy.