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

Market. The economic backdrop is okay for the markets, but certain indicators imply there is just too much euphoria among investors. The IMF raised guidance for the global economy in terms of growth, to 3.9% for this year and next. That’s the strongest global expansion since 2011. When you look at what has happened with the markets, the world Index is up 6%, Emerging-market index is up by 9%, and we are certainly seeing the economic data is strengthening in almost all quarters of the world. We are seeing solid corporate earnings growth. The US tax reforms helped a little as well. Also, commodity prices are moving up. We are seeing all the right stuff, but over the very near term, he thinks markets are a little extended, in terms of how far it has moved. We are definitely in overbought territory. A healthy pause and pull back is likely, and probably a good thing. However, over the next year or so, the market should be pretty solid.

Market. It's amazing how sentiment has really shifted for the investor. We’ve been hearing concerns everyone had about 2008-2009. There is always a bit of scepticism about this market. Markets continued to grind higher. What you look for are signs of overconfidence. With the interest in marijuana and the digital currency industry, (unproven business models), people are just lining up to toss their dough at it. At the bottom, there is a lot of fear and no one wants to talk or think about stocks.

Market. He's a little cautious. There are a number of positive factors, North American economy is growing, there is some real follow through on US tax cuts, some companies talking about increasing CapX, giving employees bonuses, and optimism in the US. However, equity market valuations are quite high with PEs close to record levels, and this late in the cycle, there is more speculative behaviour. Investors need to focus on quality, and to have some cash hedges in place.

Mutual fund heavily invested in Canadian blue-chip companies. How would it be affected if the US pulls out of NAFTA? There could certainly be an impact. It really comes down to the composition and sectors the mutual fund is in. Does it own a lot of positions in the auto parts sector, or companies that have a lot of cross border business, such as a manufacturing facility in Canada or Mexico, exporting product into the US. Those would be the kind of companies that are at most risk. Also, if the US withdrew from NAFTA, the Cdn$ could take a short-term hit. The right approach is to have a diversified portfolio.

Market. We are at the late part of the cycle. Last year was a great year, and for the 1st time since the recession, we saw the 3 major economies of the world, Europe, China and North America, all expanding together. After 10 years, we have to be thinking of systemic risks that are building up within the system. It could be a geopolitical risk, it could be trade issues. On the other side we have low interest rates which have contributed to the expansion, but have also contributed to the massive buildup of debt. If we are in a period of expansion where we are seeing interest rates increase, you have to be wary about when it begins to choke off growth. This is a time to be really cautious.

Cannabis? Has not invested in this area and has no immediate intention of doing so. This is a relatively new industry, and there are a lot of forecasts for what the demand may be. There are a lot of companies entering the field. Like all of these nascent industries, there is usually a period where you get a whole lot of initial players and then it begins to shake out.

Market. He is in Florida for the 7^th year ‘Inside ETFs conference 2018’. It is the biggest and best in the world. The biggest theme so far is the idea of strategic vs. active ETF strategies. Strategic indexing has some exciting things coming down the pipeline. The government shutdown is not exciting to the investor. After 2 to 3 weeks we could have a pullback, however. Markets are plus on the day today. It is market noise at present. In Germany there are ongoing coalition talks. 6 weeks ago after the election there was no way and this shows you how vulnerable or flexible it is. Germany is probably not going to be as strong as it was in previous crises in the world.

Emerging Markets ETF Recommendation. It is hard to hedge the currency risk. Their interest rates are far higher than our markets and so the cost of hedging is very expensive. ZEM-T, XEM-T, or DEM-N for their dividend emerging markets ETF. EDIV-N is also a buy and he owns it. DJS-N might be something to look at also.

Downside risk from BMO Tactical Global Growth and BMO Tactical Global Dividend Fund. Two funds he manages for BMO. They are ETF asset allocation funds. Both are sitting with a beta of around 30-40%. When markets correct he would then expect better valuations in them but they get you through a bear market in pretty good shape relative to the broader markets.

Educational Segment. Active or Strategic Strategies. There is a Bitcoin ETF coming to the US but probably not this year. There is a BLOK-N ETF that is an actively managed block chain ETF. The top 5 stocks in the S&P 500 account for 12.7% of the entire weight of the S&P, which is the same as the bottom 245 stocks in that index. The top 50 stocks control 50% of the index movement. It is a concentrated index. Increasingly fewer and fewer of the stocks are controlling more and more of the market outlook. SPHD-N is a smart factor index taking the best 75 quality/highest dividend payers and then sub-selecting the lowest 15 volatility stocks within that. It gives you a smoother ride. You get double the yield of the S&P.

Market. Markets are at record highs. This can take ages to resolve itself. Canada is lagging big time. 100 years on the DOW is compounding at 5% and dividends are 3 of those 5 points. You can focus on dividends but you might want to focus on dividend growers. Acquirers may be able to grow dividends by acquisitions. Tax cuts in the US are a bullish argument. They are driving things but not the same for all companies. CSX-N and retail have rebounded substantially. There are pockets of decent value but the market is not cheap.

Canada’s Grocers (Food Retailers). It is a difficult business. They are trying to diversify L-T. They are getting into businesses where there might be a little growth. EMP.A-T has been the best for 5 years but not so recently. You get an okay yield but there are better places to be in the Canadian market.

Market - It's almost like musical chairs. The music is going, you get to parade around, and when the music stops we all want to find a chair. It keeps him up a bit at night in how we will react when the inevitable correction or bear market comes. The market has been in an expansion since 2008-2009, but less then we saw in the 1990s, 1980s and 1970s. The real GDP growth is around the 2%-3% range despite over $5 trillion of money printing, quantitative easing, ultra low interest rates, etc. Yet the New York markets are plumbing new highs on a day-to-day basis. A key thing watches is the yield curve. When that inverts, that is generally a harbinger for a recession 12-18 months down the road. We are not quite there yet, and probably about 2 to 3 rate rises in Canada before the yield curve inverts, and the same or a little more in the US. Should that happen, that would be quite a warning sign for investors.

Market. Repatriation of overseas cash for US companies, is not an accurate way to gauge the value of stocks. It would have been much, much better had the repatriation conditions been specifically contingent upon monies actually being for expansion, etc., not to buy back stocks. The much larger picture of the act is that it does very substantial damage to the solvency condition of the US government. There will be kind of a foot race between the good that the tax act did for corporate earnings, and the damage it is doing to the US government. The US is in the worst fiscal condition it has ever been in, except for the last 8 years when it has just been flat lining. There had better not be a recession, because the US can't withstand one.

Market. The Trump tax cuts got through before the end of the year, and now we are seeing big companies either paying out bonuses or repatriating money from outside the country. From an economic front, this plan seems to be working very well. Because companies have got a big tax cut, doesn't automatically mean that it is going into the US economy. If a small business wants to buy a dozen computers, they are still made in China and Japan. However, it’s still far, far better than it was. When you see some of the big companies offering bonuses, particularly Apple which is bringing back a quarter of $1 billion into the US, that is extraordinary, especially when it is estimated to be around $1.5 trillion US dollars offshore. That could be a huge boost to the US economy. This will benefit stock values because when you get an increase in earnings with an absence of tax, that is tremendous for the market. Also, when a company has to pay the taxes, it is spread out over 5 years. He is now even more bullish on the US. A lot of companies are going to look at Canada from outside and ask if they really need the Canadian restrictions. Also, a lot of Canadian companies could be feeling the same and thinking about moving to the US.