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

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.

Market. We are in a bull market correction. The fed is forecasting 4 hikes and the market is saying it should b 2.5 hikes. The market is not willing to move up until the Fed acknowledges that may have to reign in their expectations. There should be volatility next week in the S&P, going down another 75 points. He likes the market here. He thinks we will have a year-end rally. There are pockets of overheating in the US labour market but with oil prices coming down that should ease the situation. He is seeing great value in Canadian stocks but foreign investors continue to short our market. The tax break last night will help the Canadian economy. We need help out west with our hydrocarbons, however.

Shorting Natural Gas. The only way to do that here is NGA (*Speculative Short*), which is US NYMEX gas. It has spiked up so will probably swing back down half way. You are making a speculative bet. He is more bullish on Natural Gas longer term. HND-T is a shorting ETF that resets every day. It is very volatile. You should only hold it for one day.

The TSX in General – Why stay? Just use the US. Cyclical names since 2008 have not come back. Don't exit Canada completely. There are software and healthcare companies. 15% of your money should be in Canada.

Market Outlook - The Equity market is on sale. Earnings are very consistent. Even in Canada Earnings surprised more n the upside than the downside. The trillion dollar question is when the equity market goes up. The gap in Earning Yield vs 30-yr Government Bonds is bribing you to buy equities. In the Corporate Bond market his fund is invested in the short term side of the yield curve. Bonds lead and credit spreads are an indication of where Equities are going.

Which one would you pick among Utilities or Telcos or REITs? - Utilities have been washed out. Among them Enbridge (ENB-T) offers a particularly good opportunity as it is cheap.

With rising rate environment how REITs are going to do? - At his firm believe that normalization is happening. We are getting there. They think that inflation is not an issue given the massive dislocation in global market through AI, disruption of technologies, etc. He believes that there is always this inflation fear that is not going to happen. As a result interest rates are going to stabilize and the sector is going to go up.

What would you recommend in term of bond trading at a deep discount? - He has some bonds on Energy company. He suggest getting 1.5% over Government of Canada Bonds. If you are going to own these bonds you have to sit on them. Liquidity for retail investors is difficult. You have to let them mature.

Market Outlook. Seeing a good correction now in the markets. Be patient and take a disciplined approach to allocating capital. Think of it as buying good stocks on sale now. Corrections and higher volatilities are a normal part of the market. When the whole market corrects, that is an opportunity to pick up real good companies that are trading a low valuations. He thinks the US economy will slow next year but does not see a recession. He thinks the Feds may raise rates next year just once or twice depending on the economy.

Today's Canadian fall fiscal update was exactly what the market expected, though Morneau didn't go as far as Trump. He hopes it's a shot in the arm, but those looking for relief from the WCS differential saw nothing concrete. Also today, oil rallied, but what can happen until pipelines are built? The lack of pipelines are a man-made problem and didn't have to happen. Maybe use a legal remedy by Ottawa to build new pipelines. Today, US markets saw some relief today. TSX outperformed New York in the past month, which is encouraging. We're 90% done this correction with maybe another 3% down to go.

What’s pushing markets down? Since October, and especially this past week, fight between earnings and interest rates and the consequent uncertainty. Optimism on earnings side from analysts, giving way to pessimism that earnings will slow down plus rising interest rates. Earnings expectations too rosy going into 2019. Yields are down from their highs, but Fed is conveying rising rates both in US and Canada, affecting equity prices. All this is taking the bloom off equity markets.

Facebook down 40% since July. It’s down, but not as dramatic as earlier in the year. It’s decline is company specific, but it’s also a factor for the tech sector which has come down. A lot of tech companies are doing well, and when they go on sale, that’s a positive.