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

Market. There is more selloff to come. Rising interest rates, rising oil prices and China trade discussions and reduction in world GDP forecasts has concerned investors. It should finish by the end of the year. And he expects a bit of a bounce. You typically get the S&P going in for another 11 months after the yield curve inverts. He thinks there is an opportunity in Canadian banks. Oil is the only commodity doing well right now.

With this current pullback, these are days investors long for because you can invest. You can buy companies cheaper. Interest rates are rising because the economy is growing. The market is adjusting to this. Now is an opportunity. If you have a long-term perspective, you can pick up companies you really like. There may be more volatility until rates settle. Could go sideways. There's also the China trade slowing with difficult numbers in Europe, not to mention the US midterms in a month. Volatility can hurt you, but also be your friend if you believe in investing in the next 20 years (i.e. your RRSP). US companies will continue to do well. Maybe there are a few more days of down markets. It's healthy to see a correction. In the next two weeks, a lot of earnings are coming out. Look out for projections of the next several quarters, like the impact of oil or wages. A great opportunity now.

Hold the Canadian dollar or go American? Currencies are tough to call the CAD dipped down to 1.22 then ran up to 1.30 because of the US trade issue, but then that was solved. He thinks the CAD will slowly strengthen as Canada raises rates. He'd convert USD to CAD. Stronger oil will help the CAD.

Market. He thinks the emerging market jitters is a leading indicator for market sentiment -- an indicator of market liquidity. Another indicator is peak debt issuance. A lot of little signs, including slowing global growth. He sees the cannabis mania as the play out of the “greater fool” theory. He thinks the TSX is breaching keep support levels and thinks there is further down side yet to come. He is 25% cash right now.

We knew rates were going up last week and the US got good jobs numbers, so their economy is sound. I guess now the market realized that rates will ramp up. She's glad to see the 10-year yield curve rise to 3.2%, while the spread between the 2- and 10-year is now 3-4 basis points vs. 25 points last month. The US Fed said it would increase rates once more this year and three in 2019, so we need rates to rise to counter a recession down the road when the yield curve inverts. Earnings should be very good this quarter, and up 22% in 2018. We need that profit growth from the U.S. in Q3. The big question is what happens to the tariff impact. Friday we see the bank earnings and this will be critical. Tech stocks got ahead of themsleves, so this pullback is healthy. We need rates high enough to cut later when the recession hits.

Pipeline or a bank for an RRSP? Buy an income stock in a non-registered account to get the dividend tax credit. Put growth stocks in an RRSP, so you can shield the capital gains for as long as possible. The pipelines pay a higher yield than banks. Put the banks in the RRSP and the pipelines in non-registered.

Overview. He is taking a bearish view on oil, expecting it to drop to $60 US. He expects it to drop this quarter. since refineries close to retool for winter grades, seasonal build in this quarter andIran sanctions are overestimated and expects an exaggerated fall back. Every month OPEC has been increasing its oil production. He expects the Western Canada Select Discount to stay low for the winter. In contrast, his view has been bullish on natural gas. Gas has gone up about 20%. He recommends AGAINST buying natural gas stocks at this time because he believes tax loss selling will be brutal this year to offset large capital gains from cannabis stocks by selling their losers.

Market. It has been a tough slog in Canada so far this year. Valuation multiples are reaching drastic lows across different sectors. Even after the NAFTA agreement, which is surprising. There is a velocity shock with rates in the US moving at the 10-year term from 2.85% to 3.25%. It takes a while usually for markets to digest this rapid movements. They are remaining cautious but constructive on the market here. In some companies they see 30-35% compression in their multiples with earnings growing at 5%. They feel those are buying opportunities. It feels that money is leaving Canada, but that tide will turn once valuations get to a certain level and people get more confident that things are happening in Canada.

Market. He has expanded his scope beyond resource stocks lately, but because of current valuations he is back recommending this sector again as it is at its maximum pessimism. The US may be considering a tariff on uranium, which could be a boon for some Canadian producers like Cameco.

Gold. It will be interesting to see what happens if inflation becomes prevalent. He thinks, as a pension style investor, you need gold in your portfolio. You need to be very specific on the company stock you buy as some are making cash hand over fist. Smaller niche players may be better than dealing with the major gold producers.

Cannabis Stocks. He wants to see some proof that the new industry will do well. No one has a proven track record yet. The astonishing market caps are very risky. Growing will eventually move to a more understandable agricultural process, but until then he is staying on the sidelines.

Market and yields. Once short-term rate hit 3%, saw some selling. With USMCA settled, he thought Canadian market would do better. Still not much below where we were a week ago. Right now, we’re in a psychologically negative market, though fundamentals remain solid, especially in Canada. The Mexican side is more stable, and this is positive for us. TSX has been underperforming the S&P 500, so we have some ground that we could catch up.

Is there confidence to come back into the Canadian market? Since July, news was negative on NAFTA, prompting investing elsewhere. It’ll be awhile before we get momentum back. Expects the Canadian market to gain some lost ground.

Rising interest rates and jobs. Canadian jobs data showed too many part-time jobs. Can’t translate short-term results into long-term trends. US employment level at 3% is excellent. Still at historically low rates, wouldn’t get too excited yet. Next month or so, tariff impact from Chinese goods could see a rise in inflation.

Canadian banks. Banks have outperformed until recently. Backward movement is temporary. Hold on to your banks. Rising rates are a positive, with NAFTA out of the way, and better prospects for the Canadian economy. If the economy does well, banks will do well.